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

Note 17. Income Tax

 

Provision for income taxes is as follows:

 

               
    December 31,  
    2025     2024  
Current:            
State   $ 271,385     $ 60,810  
Total current     271,385       60,810  
Deferred:                
Federal     (133,337 )     73,897  
State     (21,045 )     (7,838 )
Total Deferred     (154,382 )     66,059  
                 
Net provision   $ 117,003     $ 126,869

 

The differences between the expected income tax provision based on the statutory Federal United States income tax rates and the Company’s effective tax rates are summarized below:

 

               
    December 31,
2025		  
Tax Computed At The Federal Statutory Rate   $ (23,524,962 )     21.00 %
State Tax, Net Of Fed Tax Benefit     201,325       -0.18 %
Nondeductible Expenses     6,138,443       -5.48 %
Valuation Allowance     17,119,044       -23.56 %
Other/Prior Year True-Up     183,153       0.29 %
Provision from income taxes   $ 117,003       -0.57 %

 

 
[1]State taxes in Texas make up the majority (greater than 50%) of the tax effect in this category.

 

                 
    December 31,
2024		  
Tax Computed At The Federal Statutory Rate   $ (4,634,170 )     21.00 %
State Tax, Net Of Fed Tax Benefit     (352,031 )     1.60 %
Nondeductible Expenses     412,439       -1.87 %
Flowthrough Entity not Subject to Tax     870,990       -3.95 %
Foreign Corporation - Minority Interest     590       0.00 %
Non-controlling Interest     (827,332 )     3.75 %
Valuation Allowance     5,199,892     -23.56 %
Stock compensation     (488,445 )     2.21 %
Rate Change     8,363       -0.04 %
Other/Prior Year True-Up     (63,427 )     0.29 %
Provision from income taxes   $ 126,869       -0.57 %

 

Significant components of the Company’s deferred tax assets and liabilities are as follows:

 

       
    December 31,
2025		  
Deferred Tax Assets:        
Net Operating Losses   $ 11,400,601  
Intangibles     6,873,705  
Stock Compensation     53,210  
Reserves     3,581,290  
Interest Expense Carryover     3,824,177  
Lease Liability     104,795  
Fixed Assets     716,718  
Accrued Liabilities     386,318  
Other     224,860  
 Total Deferred Tax Assets     27,165,673  
Deferred Tax Liabilities:        
ROU Asset     (104,794 )
Total Deferred Tax Liabilities     (104,794 )
         
Less: Valuation Allowance     (27,060,879 )
Net Deferred Asset/(Liability)   $ 0  

 

         
    December 31,
2024		  
Deferred Tax Assets:        
Net Operating Losses   $ 7,732,475  
Stock Compensation     361,778  
Reserves     2,668,891  
Leases Liability     1,104,044  
Inventory     -  
Fixed Assets     417,949  
Accrued Liabilities     595,127  
Other     85,575  
Total Deferred Tax Assets     12,965,839  
         
Deferred Tax Liabilities:        
ROU Asset     (1,125,516 )
Intangibles     (2,068,818 )
Total Deferred Tax Liabilities     (3,194,334 )
         
Less: Valuation Allowance     (9,925,886 )
Net deferred tax liability:   $ (154,381 )

 

In determining the possible future realization of deferred tax assets, the Company has considered future taxable income from the following sources: (a) reversal of taxable temporary differences; and (b) tax planning strategies that, if necessary, would be implemented to accelerate taxable income into years in which net operating losses might otherwise expire.

 

Deferred tax assets are recognized subject to management’s judgment that realization is more likely than not. A valuation allowance is recognized for a deferred tax asset if, based on the weight of the available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized. In making such judgments, significant weight is given to evidence that can be objectively verified. Based on our review of the deferred tax assets the Company has concluded that a valuation allowance is necessary on the net operating loss balance, as realization of this asset does not meet the more likely than not threshold.

 

As of December 31, 2025 and 2024, the Company had estimated net operating losses for federal and state purposes of $49 million and $40 million, respectively. Federal net operating losses of $6.5 million will expire in 2037. State net operating loss carryovers of $8.5 million will start to expire in 2037. Other federal and state net operating loss carryovers do not have an expiration date.

 

We recognize a tax position as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination.

 

For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. We recognize potential interest and penalties related to unrecognized tax benefits in the general and administrative expense in the statement of operations of the Company.

 

The Company is in the process of filing back income tax returns from 2010 through the current year and subject to IRS examination for these years. The Company has booked a reserve for potential penalties associated with non-filing of certain foreign information reports related to its subsidiary in the Middle East. Penalties and interest have been reported in the general and administrative section of the statement of operations. The reserve balance at December 31, 2025 and 2024 was $1,029,846 and $837,477, respectively. The Company does not expect this reserve to reverse within the next 12 months, as they will apply for a penalty waiver when the tax returns are ultimately filed. Due to the non-filing of income tax returns, statutes of limitations on the potential examination of those income tax periods will continue to run until the returns are filed, at which time the statutes will begin.