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

Note 10. Income Taxes

Prior to the Company’s initial public offering in October 2015, the earnings of the Company's predecessor, which was a limited liability company taxed as a partnership, were taxable to its members. In connection with the contribution of membership interests to the Company (a C-Corporation formed in 2015), the net income or loss of the Company after the initial public offering is taxable to the Company and reflected in the accompanying consolidated financial statements.

The Company performs an evaluation of the realizability of its deferred tax assets on a quarterly basis. The Company considers all positive and negative evidence available in determining the potential of realizing deferred tax assets, including the scheduled reversal of temporary differences, recent and projected future taxable income and prudent and feasible tax planning strategies. The estimates and assumptions used by the Company in computing the income taxes reflected in the accompanying consolidated financial statements could differ from the actual results reflected in the income tax returns filed during the subsequent year. Adjustments are recorded based on filed returns when finalized or the related adjustments are identified.

Under ASC 740-10-30-5, Income Taxes, deferred tax assets should be reduced by a valuation allowance if, based on the weight of available evidence, it is more-likely-than-not (i.e., a likelihood of more than 50%) that some portion or all of the deferred tax assets will not be realized. The Company considers all positive and negative evidence available in determining the potential realization of deferred tax assets including, primarily, the recent history of taxable earnings or losses. Based on operating losses reported by the Company in prior years, the Company concluded there was not sufficient positive evidence to overcome this recent operating history. As a result, the Company believed that a valuation allowance was necessary based on the more-likely-than-not threshold noted above. The Company has recorded a valuation allowance of approximately $21.7 million as of December 31, 2025 and $16.2 million as of December 31, 2024.

Significant components of the tax expense (benefit) recognized in the accompanying consolidated statements of operations for the years ended December 31, 2025 and December 31, 2024 are as follows:

 

 

Years Ended December 31,

 

 

 

 

 

 

 

2025

 

 

2024

 

 

 

 

 

Current tax benefit

 

 

 

 

 

 

 

 

 

 

Federal

 

$

-

 

 

$

-

 

 

 

 

 

State

 

 

-

 

 

 

-

 

 

 

 

 

Total current tax expense

 

 

-

 

 

 

-

 

 

 

 

 

Deferred tax expense - Federal

 

 

(5,242,366

)

 

 

(1,751,407

)

 

 

 

 

Deferred tax expense - State

 

 

(207,536

)

 

 

(359,266

)

 

 

 

 

Valuation allowance

 

 

5,449,902

 

 

 

2,110,673

 

 

 

 

 

Income tax expense

 

$

-

 

 

$

-

 

 

 

 

 

The reconciliation of the income tax computed at the combined federal and state statutory rate of 0.0% for the years ended December 31, 2025 and 2024, respectively, to the income tax benefit is as follows:

 

 

 

Years Ended December 31,

 

 

Years Ended December 31,

 

 

 

 

2025

 

 

 

 

 

2024

 

 

 

 

 

Income tax provision at the US federal statutory rate

 

$

(5,664,790

)

 

 

21.0

%

 

$

(1,607,641

)

 

 

21.0

%

 

Nondeductible expenses

 

 

105,219

 

 

 

-0.4

%

 

 

81,692

 

 

 

-1.1

%

 

State income taxes, net of federal benefit (a)

 

 

(922,019

)

 

 

3.4

%

 

 

(328,787

)

 

 

4.3

%

 

True-up

 

 

369,810

 

 

 

-1.4

%

 

 

(274,033

)

 

 

3.6

%

 

Change in valuation allowance

 

 

5,449,902

 

 

 

-20.2

%

 

 

2,110,672

 

 

 

-27.6

%

 

Change in Rate

 

 

661,878

 

 

 

-2.5

%

 

 

18,097

 

 

 

-0.2

%

 

 Tax expense/effective rate

 

$

-

 

 

 

0.0

%

 

$

-

 

 

 

0.0

%

 

 

(a) State taxes in Florida and Oklahoma make up the majority (greater than 50%) of the tax effect in this category

 

The significant components of the Company’s deferred tax liabilities and assets as of December 31, 2025 and December 31, 2024 are as follows:

 

 

As of December 31,

 

 

As of December 31,

 

 

 

 

2025

 

 

2024

 

 

Deferred tax liabilities:

 

 

 

 

 

 

 

Depreciation

 

$

-

 

 

$

712,144

 

 

Amortization

 

 

149,513

 

 

 

77,150

 

 

Unrealized gains/losses on fair value of Bitcoin

 

 

-

 

 

 

1,718,297

 

 

Right to use assets

 

 

178,478

 

 

 

239,586

 

 

 

 

 

 

 

 

 

 

Total deferred tax liabilities

 

 

327,991

 

 

 

2,747,177

 

 

 

 

 

 

 

 

 

 

Deferred tax assets:

 

 

 

 

 

 

 

Loss carryforwards - Federal

 

 

12,809,102

 

 

 

9,833,932

 

 

Loss carryforwards - State

 

 

2,124,307

 

 

 

2,118,857

 

 

Stock option expense

 

 

2,079,792

 

 

 

2,004,956

 

 

Depreciation

 

 

940,974

 

 

 

-

 

 

Allowance for credit losses

 

 

12,820

 

 

 

13,865

 

 

Right to use liability

 

 

192,186

 

 

 

241,847

 

 

Unrealized loss on securities

 

 

4,244,147

 

 

 

4,655,574

 

 

Unrealized gains/losses on fair value of Bitcoin

 

 

(376,746

)

 

 

 

 

Unrealized gains/losses on derivatives

 

 

(69,815

)

 

 

 

 

Charitable contributions

 

 

6,658

 

 

 

6,303

 

 

Other

 

 

27,355

 

 

 

84,730

 

 

Total deferred tax asset

 

 

21,990,780

 

 

 

18,960,064

 

 

 

 

 

 

 

 

 

 

Valuation allowance

 

 

(21,662,789

)

 

 

(16,212,887

)

 

Net deferred tax asset

 

$

-

 

 

$

-

 

 

As a result of various equity transactions prior to the incorporation, the former members of the Company's predecessor recognized taxable gains associated with redemption consideration and/or deficit capital accounts totaling approximately $5.25 million. In accordance with ASC 740-20-45-11, the Company accounted for the tax effect of the step up in income tax basis related to these transactions with or among shareholders and recognized a deferred tax asset and corresponding increase in equity of approximately $1.91 million. Federal net operating loss carryforwards of approximately $512 thousand related to 2015, $3.96 million related to 2016, $2.98 million related to 2017, $1.41 million related to 2018, $1.95 million related to 2019, and $5.1 million related to 2020 will expire in 2035, 2036, 2037, 2038, respectively and net operating loss generated after January 1, 2018 will not expire. The Company's federal and state tax returns for the 2019 through 2024 tax years generally remain subject to examination by U.S. and various state authorities.

Pursuant to IRC §382 of the Internal Revenue Code, the utilization of net operating loss carryforwards and tax credits may be limited as a result of a cumulative change in stock ownership of more than 50% over a three year period. The Company underwent such a change and consequently, the utilization of a portion of the net operating loss carryforwards is subject to certain limitations.