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

Note 6 – Income Taxes

 

The Company adopted ASU 2023-09 for the year ended December 31, 2025 on a prospective basis. A reconciliation between the Company’s effective income tax rate and the federal statutory income tax rate pursuant to the disclosure requirements of ASU 2023-09 for the year ended December 31, 2025 is as follows:

 

The components of the Company's (benefit) provision for income taxes were as follows:

 

          
   Year Ended December 31,
   2025  2024
Current:          
Federal  $(1,470,003)  $— 
State   (660,436)   — 
 total  $(2,130,439)  $— 
           
Deferred:          
Federal  $207,710   $29,664 
State   65,593    9,367 
total  $273,303   $39,031 
(Benefit) provision for income tax expense  $(1,857,136)  $39,031 

 

 

            
   2025
Federal statutory income tax expense  $(571,900)   21.0%
State income taxes, net of federal income tax effect (a)   (163,400)   6.0%
Changes in valuation allowance (b)   (1,052,870)   38.7%
Return to provision adjustments   (68,966)   2.5%
Income tax benefit  $(1,857,136)   68.2%

 

(a)State taxes in Florida and California made up the majority (greater than 50 percent) of the tax effect in this category.

 

(b)The taxable gain generated from the sale of the discontinued operation (discussed below) provided a source of income, allowing for the realization of these deferred tax assets which previously did not meet the “more likely than not” criteria.

 

For comparison purposes, a reconciliation between the Company’s effective income tax rate and the federal statutory income tax rate for the year ended December 31, 2024 is as follows:

 

     
   2024
U.S. Federal Statutory Rate   21.0%
State Taxes   6.9%
Other permanent and prior period adjustments   5.7%
Valuation allowance   (33.6)%
Income tax provision   —%

 

Discontinued Operations

 

For the year ended December 31, 2025, the Company recorded a pre-tax loss from discontinued operations of $69,412 and a related tax benefit of $31,624.

 

Separately, the Company completed the sale of its discontinued operations, resulting in a pre-tax gain of $27,412,686 for the year ended December 31, 2025. The Company recorded a provision for federal and state income taxes on this gain of $7,294,005. This gain is treated as a significant, discrete item for tax purposes.

 

The $5,131,902 of tax liability is recorded as a component of the “Gain on sale of discontinued operations, net of tax” in the Consolidated Statements of Operations, with $1,166,315 recognized as “Income taxes payable” on the Consolidated Balance Sheet at December 31, 2025. The amount included in Income taxes payable at December 31, 2025 is net of estimated tax payments of $3,965,587 made during the second half of 2025.

 

The cash paid for income taxes during the year ended December 31, 2025 was as follows:

 

     
   2025
Federal  $3,915,000 
State and Local   50,587 
Tota cash paid for income taxes  $3,965,587 

 

The components of deferred taxes are as follows:

 

          
   Year Ended December 31,
   2025  2024
Deferred tax assets:          
Net operating loss carryforwards  $—   $2,277,000 
Operating lease – Right of use asset   —    172,496 
Total deferred tax assets   —    2,449,496 
Deferred tax liabilities:          
Property and equipment   —    (521,358)
Intangibles   —    (120,123)
Goodwill   —    (195,154)
Lease Liability   —    (158,947)
Deferred gain   (312,334)   — 
Total deferred tax liabilities   (312,334)   (995,582)
           
Valuation Allowance   —    (1,492,945)
           
Net deferred taxes  $(312,334)  $(39,031)

 

The Company had no remaining net operating tax loss carryforwards as of December 31, 2025.

 

The Company’s prior deferred tax liabilities included amounts related to the difference between the book basis and tax basis of goodwill acquired in a taxable business combination, which is deductible for tax purposes over 15 years. Because this deferred tax liability, also known as a ‘naked credit’, relates to an indefinite-lived intangible asset (goodwill) that was not previously expected to reverse in the foreseeable future, it was not considered a source of taxable income for the purpose of assessing the realization of deferred tax assets.

 

During the year ended December 31, 2025, following the sale of the Cloud Solutions Business, the Company conducted a Section 382 study through October 31, 2025 to assess whether a change or changes of control, as defined in Section 382, have occurred since inception. The Company has determined that it has undergone two ownership changes which potentially limit the use of the Company’s tax attributes. The first ownership change will have no practical impact on the Company since there were no pre-change loss attributes identified in the Section 382 study. The second ownership change created an annual limitation for the 2021 tax year and thereafter. However, the recognition of prior unrealized gains during the year ended December 31, 2025 will substantially expand the limitation for the 2025 tax year. The Company expects these net operating losses to be utilized.