v3.26.1
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes

NOTE 15 – INCOME TAXES

The Company accounts for income taxes under ASC 740, which provides for an asset and liability approach of accounting for income taxes. Under this approach, deferred tax assets and liabilities are recognized based on anticipated future tax consequences, using currently enacted tax laws, attributed to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts calculated for income tax purposes. All of the company's pre-tax earnings were derived from domestic sources. The Company has not and does not expect to file income tax returns with respect to any foreign jurisdiction. In addition to federal taxes, the Company is subject to state taxation in Arizona, California, Delaware, Florida, Pennsylvania and Texas.

 

The components of the Company’s provision for income taxes for the years ended December 31, 2025 and 2024 are as follows:

 

 

Year Ended December 31,

 

 

2025

 

 

2024

 

 Current:

 

 

 

 

 

 Federal

$

36,262

 

 

$

(97,279

)

 State

 

—

 

 

 

—

 

 Total current

 

36,262

 

 

 

(97,279

)

 Deferred:

 

 

 

 

 

 Federal

 

(1,442,752

)

 

 

(2,848,758

)

 State

 

1,113,750

 

 

 

(1,492,656

)

 Total deferred

 

(329,002

)

 

 

(4,341,414

)

 Valuation allowance

 

329,002

 

 

 

4,341,414

 

 Income tax expense (benefit)

$

36,262

 

 

$

(97,279

)

For the year ended December 31, 2025, the Company received a net federal income tax refund of $265,576. and paid, net of refunds, $0 in state income taxes. The Company paid, net of refunds, $0 in federal and state income taxes in the year ended December 31, 2024.

The following reconciles the Company’s income taxes at the federal statutory rate to its reported income tax expense (benefit):

 

 

Year Ended December 31,

 

 

2025

 

 

 

2024

 

Federal taxes at statutory rate

$

(1,442,494

)

 

 

21.0

%

 

 

$

(2,257,026

)

 

 

21.0

%

Effects of:

 

 

 

 

 

 

 

 

 

 

 

 

State taxes, net of federal benefit

 

(83,407

)

 

 

1.2

%

 

 

 

(473,757

)

 

 

4.4

%

Stock-based compensation

 

145,486

 

 

 

(2.1

)%

 

 

 

173,679

 

 

 

(1.6

)%

Research and development expenses, net

 

(96,897

)

 

 

1.4

%

 

 

 

102,639

 

 

 

(1.0

)%

Change in deferred tax rate

 

654,980

 

 

 

(9.5

)%

 

 

 

(1,100,408

)

 

 

10.2

%

Accrued compensation

 

144,491

 

 

 

(2.1

)%

 

 

 

(271,238

)

 

 

2.5

%

Loss on forward purchase agreement

 

—

 

 

 

—

%

 

 

 

1,197,095

 

 

 

(11.1

)%

Other

 

(52,160

)

 

 

0.8

%

 

 

 

(7,126

)

 

 

(0.3

)%

Valuation allowance

 

766,263

 

 

 

(11.2

)%

 

 

 

2,538,863

 

 

 

(23.2

)%

Income tax expense (benefit)

$

36,262

 

 

 

(0.5

)%

 

 

$

(97,279

)

 

 

0.9

%

 

Significant components of the Company’s deferred tax assets as of December 31, 2025 and 2024 are summarized below.

 

 

December 31,

 

 

2025

 

 

2024

 

Deferred income tax assets:

 

 

 

 

 

Net operating losses

$

9,872,228

 

 

$

8,909,827

 

Accrued interest

 

1,745,522

 

 

 

1,770,766

 

Federal research and development tax credits

 

56,911

 

 

 

56,911

 

Amortization of research expense

 

333,083

 

 

 

460,061

 

Right of use asset

 

2,654

 

 

 

3,590

 

Non-qualified deferred compensation

 

689,833

 

 

 

551,492

 

Change in fair value of forward purchase agreement

 

3,703,852

 

 

 

4,361,287

 

Capitalization of start-up costs

 

303,802

 

 

 

386,345

 

Accrued liabilities

 

145,325

 

 

 

—

 

Gross deferred tax assets

 

16,853,210

 

 

 

16,500,279

 

Deferred income tax liabilities:

 

 

 

 

 

Depreciation and amortization

 

(28,424

)

 

 

(36,090

)

Change in fair value of acquisition liabilities

 

(31,595

)

 

 

—

 

Gross deferred tax liabilities

 

(60,019

)

 

 

(36,090

)

Total net deferred tax assets

 

16,793,191

 

 

 

16,464,189

 

Valuation allowance

 

(16,793,191

)

 

 

(16,464,189

)

Net deferred income tax assets

$

—

 

 

$

—

 

 

As of December 31, 2025, the Company had approximately $35.7 million of federal and $44.8 million of state net operating loss carryforwards. Federal and state net operating loss carryforwards were approximately $29.5 million and $43.3 million, respectively, for the year ended December 31, 2024. The Company’s federal net operating loss carryforwards consist of approximately $7.4 million of pre-2018 net operating loss carryforwards, which expire after twenty years and begin to expire starting in 2028. The Company has approximately $28.3 million of post-2017 net operating losses that carry forward indefinitely. Future utilization of the net operating loss carryforwards is subject to certain limitations under Section 382 of the Internal Revenue Code. In addition, the Company has approximately $57,000 of federal research and development credit carryovers, which expire after twenty years and begin to expire starting in 2041. The Company utilized approximately $0 of such credits for tax year 2025. Future realization of the credit carryforwards is subject to certain limitations under Section 383 of the Internal Revenue Code. The Company has not undertaken any formal research and development credit study to calculate its credits.

The Company provides for a valuation allowance when it is more likely than not that it will not realize a portion of the deferred tax assets. The Company has established a valuation allowance against the net deferred tax asset due to the uncertainty that enough taxable income will be generated in those taxing jurisdictions to utilize the assets. Therefore, the Company has not reflected any benefit of such deferred tax assets in the accompanying consolidated financial statements. Our net deferred tax asset and valuation allowance increased by $329,006 and $4,341,414 for the years ended December 31, 2025 and 2024, respectively.

The Company is subject to U.S. federal income tax examinations by tax authorities for all tax years since inception due to unexpired net operating loss carryforwards originating in and after that year. In addition, the Company may be subject to income tax examinations by various state taxing authorities for tax years that vary by jurisdiction.

 

The Company has evaluated its income tax positions and has determined that it does not have any uncertain tax positions. The Company will recognize interest and penalties related to any uncertain tax positions through its income tax expense.