16. INCOME TAXES

The Company’s provision (benefit) at statutory rates for income taxes consists of the following for the year ended December 31, 2025 and 2024:

A reconciliation of the federal statutory rate to 0.0% for the year ended December 31, 2025 and 2024 to the effective rate for income from operations before income taxes is as follows:    

The tax effects of these temporary differences along with the net operating losses, net of an allowance for credits, have been recognized as deferred tax assets (liabilities) at December 31, 2025 and 2024 as follows:

The Company establishes a valuation allowance, if based on the weight of available evidence, it is more likely than not that some portion or all of the deferred assets will not be realized. During 2024 certain adjustments were made to the Company’s net operating loss carry-forward tax asset for IRC Section 382 limitations. The valuation allowance increased by $3,728,360 and $4,922,575 during the years ended December 31, 2025 and 2024, respectively. 

As of December 31, 2025, the Company had a net operating loss carry forward of approximately $80.9 million for Federal and State tax purposes. The net operating loss expires beginning 2030 through 2037 for those losses generated in 2017 and prior years. Approximately $74 million of such net operating losses will carry-forward indefinitely and be available to offset up to 80% of future taxable income each year. Subsequent to December 31, 2019, the Coronavirus Aid, Relief and Economic Security Act (CARES Act) was passed, which temporarily removes such 80% limitation for years 2019 and 2020. The Company’s net operating loss carry-forward may be subject to annual limitations, which could reduce or defer the utilization of the losses as a result of an ownership change as defined in Section 382 of the Internal Revenue Code. 

As required by the provisions of ASC 740, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 0 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. Differences between tax positions taken or expected to be taken in a tax return and the net benefit recognized and measured pursuant to the interpretation are referred to as unrecognized benefits. A liability is recognized (or amount of net operating loss or amount of tax refundable is reduced) for an unrecognized tax benefit because it represents an enterprises potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC 740.

The Company recognizes interest and penalties related to uncertain tax positions in general and administrative expenses. As of December 31, 2025, the Company has no unrecognized tax positions, including interest and penalties. The Company files returns in the United States Federal tax jurisdiction and various other state jurisdictions.

In accordance with ASU 2023-09, the following table presents income taxes paid (net of refunds) for the years ended December 31, 2025 and 2024, disaggregated between domestic federal and state and local jurisdictions. No individual state jurisdiction exceeded 5% of the total income taxes paid in either period.

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. Tax years 2022 through 2025 remain subject to examination by the federal taxing authority, and tax years 2021 through 2025 remain subject to examination by state taxing authorities. The Company’s 2025 federal and state returns are currently on extension and will be subject to examination upon filing. In addition, because the Company has net operating loss carryforwards, the taxing authorities may examine tax years in which those carryforwards arose to the extent they are utilized in an open year.