v3.26.1
Income Taxes
 3 Months Ended
Mar. 31, 2026
Income Taxes [Abstract]  
Income Taxes

Note 3 – Income Taxes 

 

The Company utilizes FASB ASC 740, “Income Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.

 

Deferred income taxes arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or noncurrent depending on the periods in which the temporary differences are expected to reverse. The Company does not have any uncertain tax positions.

 

For U.S. purposes, the Company has not completed its evaluation of net operating loss (NOL) utilization limitations under Internal Revenue Code, as amended (the “Code”) Section 382/383, change of ownership rules. If the Company has had a change in ownership, the NOLs would be limited or eliminated, as to the amount that could be utilized each year, based on the Code. NOLs attributable to Breakthrough Products, Inc., which are the majority of the Company’s domestic NOLs are Separate Return Limitation Year (SRLY) NOLs. Such losses may generally not be available for use (limited or eliminated).

 

The Company has not filed its State & Local Income/Franchise tax returns in states it is required to file, as such returns and liability remain open. The Company does not expect this to be a significant liability. 

 

The table below summarizes the differences between the U.S. statutory federal rate and the Company’s estimated effective tax rate for the three months ended March 31, 2026 and 2025:

 

 

 

   March 31,
2026
($)		   March 31,
2026		   March 31,
2025
($)		   March 31,
2025		 
U.S. Statutory Rate  $(542,350)   (21)%  $181,609    21

%

                     
AU/CA/MXN rates in excess of the US rate   (30,868)   (1)%   (4,593)   (1)%
                     
Increase (decrease) in valuation allowance   590,370    22%   (188,477)   (21)%
Permanent differences   
-
    
-
%   
-
    
-
%
Prior period true up   (3,432)   (1)%   
-
    
-
%
Total provision for income taxes  $(13,720)   (1)%  $(11,460)   (1)%

 

The Company has deferred tax assets, which have been fully reserved, as follows as of March 31, 2026 and December 31, 2025:

 

   March 31,
2026		   December 31,
2025		 
Net operating Losses  $10,703,792   $11,993,073 
           
Obsolete inventory   26,326    26,326 
Nonstatutory stock options   548,931    515,319 
Other   57,750    43,313 
Impairment of intangible asset   220,150    220,150 
Amortization   
-
    
-
 
Bad debt reserve   
-
    
-
 
Other   
-
    2,815,819 
Deferred tax asset   11,556,949    15,614,000 
Valuation allowance for deferred tax assets   (11,556,949)   (15,614,000)
Net deferred tax assets  $
-
   $
-
 

The Company had tax benefit of $13,720 and $11,460 for the three months ended March 31, 2026 and 2025, respectively.

 

Income tax provision (benefit) consists of the following for the three months ended March 31, 2026 and 2025:

 

   For the Three Months Ended
March 31,		 
Income tax provision (benefit):  2026   2025 
Current        
Federal   $
-
    $
-
 
State   
-
    
 
 
Foreign   (13,720)   (11,460)
Total Current   (13,720)   (11,460)
Deferred          
Federal   
-
    
-
 
State   
-
    
-
 
Foreign   
-
    
-
 
Total Deferred   
-
    
-
 
           
Total income tax benefit  $(13,720)  $(11,460)

 

The table below summarizes the (loss) income before taxes for domestic and foreign jurisdictions:

 

   March 31, 2026   March 31, 2025 
         
Domestic (U.S.)  $(2,239,496)  $916,230 
Foreign   (343,123)   (51,426)
Total  $(2,582,619)  $864,804 

 

The table below summarizes the income tax expense for the three months ended March 31, 2026 and 2025:

 

   March 31, 2026   March 31, 2025 
Federal  $
-
   $
-
 
State   
-
    
 
 
Foreign   (13,720)   (11,460)
Total  $(13,720)  $(11,460)

 

The Company also has net operating loss carryforwards of approximately $59,582,000  and approximately $57,000,000 (United States, Canada and Australia) included in the deferred tax assets for March 31, 2026 and December 31, 2025, respectively, the majority attributable to the acquisition of Breakthrough Products, Inc. However, due to limitations of carryover attributes and separate return limitation year rules, it is unlikely the company will benefit from the NOLs and thus management has determined a 100% valuation allowance is required. Further, the Company has not completed an evaluation of the NOLs attributable to Breakthrough Products, Inc. at the date of this report.