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

NOTE 14 – INCOME TAXES

 

The components of the provision (benefit) for income taxes for the years ended December 31, 2025, 2024 and 2023 are as follows:

 

   December 31, 2025   December 31, 2024   December 31, 2023 
Current:               
Federal   -    -    - 
State   4,177    3,305    16,625 
Foreign   48,200    64,181    88,323 
Total Current   52,377    67,486    104,948 
                
Deferred:               
Federal   -    -    - 
State   -    -    - 
Total Deferred   -    -    - 
                
Income tax expense   52,377    67,486    104,948 

 

The Company’s provision for income taxes for the years ended December 31, 2025, 2024 and 2023 is based on the annual effective tax rate, plus discrete items. The following table presents the provision for income taxes and the effective tax rates for and years ended December 31, 2025, 2024 and 2023:

SCHEDULE OF PROVISION AND EFFECTIVE TAX RATES 

   December 31, 2025   December 31, 2024   December 31, 2023 
Loss before income tax provision  $(7,849,400)  $(5,533,741)  $(9,222,658)
Income tax provision   52,377    67,486    104,948 
Effective tax rate   -0.65%   -1.22%   -1.14%

 

For the years ended December 31, 2025, 2024 and 2023 the difference between the Company’s effective tax rate and the federal statutory tax rate of 21% relates to permanent differences, state and local income taxes, a net increase in the valuation allowances, and other discrete items.

 

The following is a reconciliation of the income tax at the federal statutory rate to the Company’s provision (benefit) for income taxes for the years ended December 31, 2025, 2024 and 2023:

 

   December 31, 2025   December 31, 2024   December 31, 2023 
Income tax expense at federal statutory rate  $(1,705,257)   21.0%  $(1,130,444)   20.43%   (1,936,758)   21.0%
State and local income taxes net of federal tax benefit   (28,024)   0.35%   (37,147)   0.67%   (24,108)   0.2%
Return to provision adjustments   (123,543)   1.52%   (520,517)   9.41%   (205,230)   2.2%
Change in valuation allowance   1,113,438    -13.71%   1,640,303    -29.64%   1,952,580    -21.2%
Permanent differences   219,431    -2.70%   (436,505)   7.89%   (227,266)   2.64%
Earnings of foreign subsidiary   493,487    -6.08%   511,792    -9.25%   457,407    -4.9%
Foreign taxes   48,200    -0.59%   64,181    -1.16%   88,323    -0.9%
Other – net   34,645    -0.43%   (24,177)   0.44%   -    - 
Income tax expense (benefit)  $52,377    -0.65%  $67,486    -1.22%  $104,948    -1.14%

 

 

At December 31, 2025, 2024 and 2023, the Company had federal net operating losses (“NOLs”) in the amount of $45,611,010, $40,616,589 and $33,069,147 respectively, which are offset by a valuation allowance. These NOLs expire from 2035 to 2042 or have indefinite lives as follows. Under the Tax Cuts & Jobs Act of 2017 (“TCJA”) and the Coronavirus Aid, Relief, and Economic Security Act of 2020 (“CARES Act”), net operating loss deductions are limited to 80% of taxable income for tax years after December 31, 2020.

 

12/31/2035  $35,945 
12/31/2036   836,622 
12/31/2037   1,922,017 
Indefinite   42,816,426 
Total Federal Net Operating Loss Carryforward  $45,611,010 

 

The tax effects of temporary differences and related deferred tax assets and liabilities are as follows:

SCHEDULE OF DEFERRED TAX ASSET 

   December 31, 2025   December 31, 2024 
Accrued expenses  $-   $- 
Fixed and intangible assets   266,963    194,581 
Allowance for doubtful accounts   0   38,013 
Stock Options   111,424    111,125 
Warrant amortization   208,576    208,015 
Net operating loss – Federal   9,793,015    8,529,484 
Net operating loss – States   295,685    266,028 
Deferred tax asset, gross   10,460,663    9,347,246 
Less: Valuation allowance   (10,460,663)   (9,347,246)
Net deferred tax asset  $-   $- 

 

The Company has a valuation allowance of $10,460,663 and $9,347,246 as of December 31, 2025 and 2024, respectively. The valuation allowance increased by $1,113,417. In making this determination, the Company is required to give significant weight to evidence that can be objectively verified. It is generally difficult to conclude that a valuation allowance is not needed when there is significant negative evidence, such as cumulative losses in recent years. Forecasts of future taxable income are considered to be less objective than past results.

 

Income tax expense is recorded using the asset and liability method. Deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to temporary differences between amounts reported for income tax purposes and financial statement purposes, using current tax rates. A valuation allowance is recognized if it is anticipated that some or all of a deferred tax asset will not be realized. The Company must assess the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent that the Company believes that recovery is not likely, it must establish a valuation allowance. Significant management judgment is required in determining the provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against net deferred tax assets.

 

The Company is subject to taxation in the United States and Mexico. Earnings from non-U.S. activities are subject to local country income tax. None of the Company’s federal, state, or local income tax returns are currently under examination by the United States or respective authorities. The Company’s 2022 to 2024 tax years remain subject to potential examination by the United States and various state and local jurisdictions.