NOTE 12. INCOME TAXES

Prior to the legal reorganization completed on September 13, 2024, HCMC included certain carve-out entities, including HCWC, in its consolidated income tax filings within the respective tax jurisdictions. Although HCMC’s 2024 tax returns continued to include HCWC through the Spin-Off date, the income tax provision for 2024 was prepared on a standalone basis, as if HCMC had operated independently for the period presented. Following the Spin-Off, HCMC now files federal and state income tax returns solely for its continuing operations. Deferred tax assets and liabilities recognized as of December 31, 2025, relate only to the Company’s retained businesses and tax attributes. Income taxes continue to be accounted for under the asset and liability method.

The Spin-Off of HCWC was completed on September 13, 2024, through a pro rata distribution of HCWC common stock to HCMC shareholders. The transaction was structured to qualify as tax-free under Sections 355(a) and 368(a)(1)(D) of the Internal Revenue Code (“IRC”). In connection with the separation, HCMC and HCWC entered into a Tax Matters Agreement (“TMA”) executed in December 2023 that governs each company’s respective federal and state income tax matters, including the allocation of liabilities and responsibilities for periods before and after the separation:

During 2025, HCWC completed its analysis of the Spin-Off and the TMA and notified HCMC that HCMC retained all pre-Spin U.S. federal and state net operating loss carryforwards, tax credit carryforwards, and other pre-Spin tax attributes and related temporary differences. Based on this confirmation and management’s review, HCMC updated its assessment of deferred tax assets associated with these retained attributes and recorded adjustments to deferred tax balances and the related valuation allowance to reflect the final allocation of tax attributes between HCMC and HCWC. These adjustments were recognized as a discrete item in the 2025 income tax provision and effective tax rate reconciliation.

The Company did not have a provision for income taxes (current or deferred) for the years ended December 31, 2025 and 2024. The Company presents below (i) a reconciliation of income tax expense (benefit) computed at the U.S. federal statutory rate to the income tax expense (benefit) reflected in the accompanying statement of operations and (ii) a reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate for the years then ended.

The following table sets forth the reconciliation of income tax expense (benefit) (in dollars):

 SCHEDULE OF INCOME TAX RECONCILIATION EXPECTED EXPENSE (BENEFIT)

The following table sets forth the reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate (in percentages):

 SCHEDULE OF RECONCILIATION INCOME TAX RATE

As of December 31, 2025 and 2024, the Company’s deferred tax assets and liabilities consisted of the effects of temporary differences attributable to the following:

 SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the positive and negative evidence available, management has determined that a valuation allowance is required at December 31, 2025 and 2024 to reduce the deferred tax assets to amounts that are more likely than not to be realized. The Company’s valuation increased by approximately $550,980 and $2,052,000 for the tax years ended 2025 and 2024, respectively. The change in valuation allowance disclosed in the effective tax rate reconciliation for 2025 includes the effect of removing the pre‑Spin deferred tax assets and corresponding valuation allowance that relate to tax attributes retained by HCWC. Should the factors underlying management’s analysis change, future valuation adjustments to the Company’s net deferred tax assets may be necessary.

At December 31, 2025 the Company had U.S. federal and state net operating loss carryforwards (“NOLs”) of $94.2 million and $59.1 million, respectively. Federal NOLs of $46.3 million expire beginning in 2030 through 2037 and $47.9 million do not expire and are subject to 80% of taxable income under Internal Revenue Code Section 172. Florida state NOLs of $36.3 million expire beginning in 2030 through 2037 and $22.8 million do not expire and maybe subject to income limitations under State statute. Utilization of our NOLs may be subject to an annual limitation under section 382 and similar state provisions of the Internal Revenue Code due to changes of ownership that may have occurred or that could occur in the future, as defined under the regulations.

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law. Among other provisions, the IRA includes a 15% corporate alternative minimum tax on applicable corporations and 1% excise tax on stock repurchases made after December 31, 2022. The IRA is not expected to have a material impact on the consolidated financial statements.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted, which, among other things, modifies certain business tax provisions, including interest expense limitations, depreciation and amortization rules, and selected energy‑related incentives that interact with the IRA. The Company has evaluated the OBBBA and does not currently expect it to have a material impact on its consolidated financial statements.

The Company had no uncertain tax positions as of December 31, 2025, and 2024.

The Company files a federal income tax return and income tax return in Florida and the Company is generally no longer subject examinations by federal and Florida tax authorities for years before 2022.