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

Note 14. Income Taxes

 

The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. While the Company has considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event the Company were to determine that it would not be able to realize all or part of its net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination was made. Likewise, should the Company determine that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount, an adjustment to the deferred tax assets would increase income in the period such determination was made.

 

 

The components of the provision for income tax expense are as follows for the years ended:

 

   2025   2024 
   December 31, 
   2025   2024 
Current taxes          
Federal  $

18,447

   $— 
State   

6,299

    — 
Current taxes   

24,746

    — 
True up for new state tax rate   

(7,254

)     
Perm differences   

1,393

      
Temp differences   21,803    62,146 
Change in valuation allowance   (23,656)   (62,146)
           
Provision for income tax expense  $17,302   $— 

 

The following is a summary of the significant components of the Company’s deferred tax assets and liabilities at December 31, 2025 and 2024:

   2025   2024 
   December 31, 
   2025   2024 
Deferred tax assets:          
Equity based compensation  $435,652   $416,237 
Allowance for doubtful accounts   5,209    5,954 
Deferred Rent   6,372   (1,796)
Reserves for slow moving inventory   44,394    50,292 
Depreciation   87,285    52,867 
Reserve for recall   10,247    0 
Net operating loss carry forward   1,995,307    2,027,000 
Total deferred tax assets   2,584,466    2,550,554 
Deferred tax liabilities          
Reserve for recall   -    - 
Total deferred tax asset (liability)   -    - 
Total deferred tax   2,584,466    2,550,554 
Valuation allowance   (2,584,466)   (2,550,554)
           
Deferred tax assets, net of valuation allowance  $-   $- 

 

The effective tax rate used for calculation of the deferred taxes as of December 31, 2025 was (26.93)%. The Company has established a 100% valuation allowance against deferred tax assets of approximately $2,584,466, due to the uncertainty regarding realization reserve against the deferred tax assets. The change in valuation allowance was a decrease of $33,912. The Company has approximately $3,346,650 of net loss carryforward that expire through 2037 and $1,525,938 that carryforward indefinitely but is limited to 80% of taxable income in any one year.

 

The effective tax rate used for calculation of the deferred taxes as of December 31, 2025 was 26.66%. The Company has established a 100% valuation allowance against deferred tax assets of $2,584,466 due to the uncertainty regarding realization reserve against the deferred tax assets. The change in valuation allowance was a decrease of $33,912.

 

The significant differences between the statutory tax rate and the effective tax rates for the Company for the years ended are as follows:

 

   2025   2024 
   December 31, 
   2025   2024 
Statutory tax rate-Federal   21.00%   21.00%
State tax, net of Federal benefits   7.17%   (4.00)%
True up for new state tax rate   

8.26

%   - 
Permanent differences   (1.58)%   0.11%
Temporary differences   (24.82)%   (1.17)%
Change in valuation allowance   23.76%   26.06%
Effective tax rate   (13.740)%   —%

 

The Company’s income tax returns for 2020 through 2025 remain subject to examination by the Internal Revenue Services and state tax authorities.