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

14. Income tax

 

The Company computes taxes using the asset and liability method in accordance with FASB ASC Topic 740, Income Taxes. Under the asset and liability method, the Company determines deferred income tax assets and liabilities based on the differences between the financial reporting and tax bases of assets and liabilities and measure them using currently enacted tax rates and laws. A valuation allowance is provided for deferred tax assets that, based on available evidence, are more likely than not to be realized.

 

The Company’s accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of its net deferred tax assets. The Company primarily considered such factors as its history of operating losses, the nature of the company’s deferred tax assets, and the timing, likelihood and amount, if any, of future taxable income during the periods in which those temporary differences and carryforwards become deductible. As of December 31, 2025 and 2024, the Company does not believe that it is more likely than not that the deferred tax assets will be realized for the U.S. entities and the foreign entities; accordingly, a full valuation allowance has been established for the U.S. entities and the foreign entities, and no deferred tax asset is shown in the Company’s balance sheet. For the year ended December 31, 2025, the valuation allowance for deferred tax assets decreased by $4.1 million due to NOL write off for inactive foreign entities for 2025.

 

The unrecognized temporary differences of the Company that give rise to significant portions of the Company’s deferred tax assets and liabilities as of December 31, 2025 and 2024 are set forth below:

  

   December 31, 2025   December 31, 2024 
         
Deferred tax assets          
Charitable Contribution  $199,198   $206,308 
Fixed Assets   153,716    341,926 
Stock Compensation   1,404,442    735,725 
Section 163(j) Interest limitation   2,150,199    2,495,754 
Capital Gain   650,608    650,608 
Unrealized Gain   1,187,301    821,893 
Organization Costs   56,061    52,103 
Accrued Expenses   3,020,654    2,929,799 
Net operating Loss   97,490,319    111,190,694 
R&D Credit   196,501    196,501 
Lease Liability   489,418    340,825 
Section 174 Expenses   24,222    35,396 
Loss on dispotion of assets   151,484    - 
Investment in Digital Assets   4,783,868    - 
Intangibles    2,112,103    890,406 
Total deferred tax assets  $114,070,094   $120,887,938 
           
Deferred tax liabilities          
Intangibles  $824,745   $2,986,522 
Bad Debt Reserve   202,232    - 
Right of use assets   323,205    188,003 
Other Adjustment   -    49,132 
Deferred tax liabilities  $1,350,182   $3,223,657 
           
Valuation Allowance   (113,530,616)   (117,664,281)
           
Net deferred tax assets (liabilities)  $(810,704)   $- 

 

The provision for income taxes for the years ended December 31, 2025 and 2024 consisted of the following:

  

       
   For the year ended 
   December 31, 2025   December 31, 2024 
         
Current:          
US  $65,002   $         - 
Foreign   43,015    - 
Total current tax expense (benefit)  $108,017   $- 
           
Deferred:          
US  $-   $- 
Foreign   (44,296)   - 
Total deferred tax expense (benefit)  $(44,296)  $- 
           
Total income tax expense (benefit)  $63,721   $- 

 

 

The reconciliation between the income tax expense (benefit) calculated by applying statutory rates to net loss before income taxes and the income tax expense (benefit) reported in the consolidated financial statements is as follows:

  

       
   For the year ended 
   December 31, 2025   December 31, 2024 
         
         
Income (loss) before income taxes  $(40,036,762)  $(48,750,907)
Statutory income tax rate   21.0%   21.0%
Expected income tax (benefit)  $(8,407,720 )  $(10,237,690)
           
Reconciling items:          
Change in valuation allowance   (4,133,665)   51,434,409 
State taxes   65,002    - 
Permanent differences   2,977,161    3,093,876 
Return to provision   9,645,460    4,306,483 
Purchase accounting adjustments   -    (47,300,799)
Disposal of business units   -    (966,704)
Other   (82,517)   (329,575)
Total income tax expense (benefit)  $63,721   $- 

 

The Company believes that income tax filing positions will be sustained upon examination and does not anticipate any adjustments that would result in a material adverse effect on the Company’s financial position, results of operations or cash flows. Accordingly, the Company has not recorded any reserves, or related accruals or uncertain income tax positions as of December 31, 2025 or 2024.

 

The Company recognizes interest accrued related to unrecognized tax benefits and penalties in income tax expense. The Company has no accruals for interest and penalties as of December 31, 2025 and 2024.

 

Federal and state tax laws impose significant restrictions on the utilization of net operating loss carryforwards in the event of a change in ownership of the Company, as defined by Internal Revenue Code Section 382 (“Section 382”). As of December 31, 2025, the Company has not performed a formal Section 382 study. However, due to full valuation allowance, any limitation of the utilization of NOL carryovers would not have any impact on the statement of operations. as of December 31, 2025, the Company has net operating loss carryforwards for federal and state income tax purposes of approximately $335.4 million and $244.5 million, respectively. Most of the federal net operating loss carryforwards, if not utilized, will carryforward indefinitely. Some of the state net operating loss carryforwards, if not utilized, will expire beginning in 2030.

 

There are currently no federal, or state income tax audits in progress.