| SCHEDULE OF PROVISION FOR INCOME TAXES |
The
Company’s provision for income taxes for the three months ended March 31, 2026 and 2025 consisted of the following:
SCHEDULE OF PROVISION FOR INCOME TAXES
| | |
2026 | | |
2025 | |
| | |
Three months ended | |
| | |
March 31, | |
| | |
2026 | | |
2025 | |
| | |
| | |
| |
| Current tax provision | |
$ | 2,099 | | |
$ | 4,323 | |
| Deferred tax provision | |
| - | | |
| - | |
| Total provision for income taxes | |
$ | 2,099 | | |
$ | 4,323 | |
|
The
Company’s income tax expenses for the years ended December 31, 2025 and 2024 are as follows. The two VIEs have no income taxes
during the years ended December 31, 2025 and 2024.
SCHEDULE OF PROVISION FOR INCOME TAXES
| | |
2025 | | |
2024 | |
| | |
Years ended | |
| | |
December
31, | |
| | |
2025 | | |
2024 | |
| | |
| | |
| |
| Current tax provision | |
$ | 4,651 | | |
$ | 7,824 | |
| Deferred tax provision | |
| - | | |
| - | |
| Total provision for
income taxes | |
$ | 4,651 | | |
$ | 7,824 | |
|
| SCHEDULE OF FEDERAL STATUTORY INCOME TAX RATE |
The
following table reconciles the U.S. federal statutory income tax rate to the Company’s effective tax rate for the three months
ended March 31, 2026 and 2025:
SCHEDULE OF FEDERAL STATUTORY INCOME TAX RATE
| | |
2026($) | | |
2026(%) | | |
2025 ($) | | |
2025(%) | |
| | |
Three months ended March 31, | |
| | |
2026($) | | |
2026(%) | | |
2025 ($) | | |
2025(%) | |
| Tax provision | |
$ | 31,017 | | |
| 21 | % | |
$ | (15,299 | ) | |
| 21.00 | % |
| Effect of State taxes | |
$ | 1,658 | | |
| 1.12 | % | |
$ | 3,415 | | |
| (4.69 | )% |
| federal effect of state tax in deferred | |
$ | 1,427 | | |
| 0.97 | % | |
$ | 12,785 | | |
| (17.55 | )% |
| Foreign tax rate differential | |
$ | - | | |
| 0.00 | % | |
$ | 3,553 | | |
| (4.88 | )% |
| R&D tax credits | |
$ | - | ) | |
| 0.00 | % | |
$ | -) | | |
| 0.00 | % |
| Change in valuation allowance | |
$ | (29,270 | ) | |
| (19.82 | )% | |
$ | 1,374 | | |
| (1.89 | )% |
| Credits generated in current year | |
$ | (1,181 | ) | |
| 0.80 | % | |
$ | (1,507 | ) | |
| 2.07 | % |
| FDII | |
$ | (1,054 | ) | |
| 0.71 | % | |
$ | - | | |
| 0.00 | % |
| Permanent differences | |
$ | - | | |
| 0.00 | % | |
$ | 2 | | |
| 0.00 | % |
| RTP | |
$ | - | | |
| 0.00 | % | |
$ | - | | |
| 0.00 | % |
| Federal Tax - PY | |
$ | - | | |
| 0.00 | % | |
$ | - | | |
| 0.00 | % |
| Federal Penalties | |
$ | - | | |
| 0.00 | % | |
$ | - | | |
| 0.00 | % |
| Rounding | |
$ | (499 | ) | |
| (0.34 | )% | |
| - | | |
| 0.00 | % |
| Effective tax rate | |
$ | 2,099 | | |
| 1.42 | % | |
$ | 4,323 | | |
| (5.93 | )% |
|
The
following table reconciles the U.S. federal statutory income tax rate to the Company’s effective tax rate for the years ended December
31, 2025 and 2024:
SCHEDULE
OF FEDERAL STATUTORY INCOME TAX RATE
| |
|
|
|
| |
2025 | | |
2024 | |
| |
|
|
Years ended | |
| |
|
|
December
31, | |
| |
|
2025 ($)
(000s)
|
| |
2025
(%) | | |
2024
(%) | |
| Expected tax at 21% |
|
$ |
(5,211 |
) | |
| 21.00 | % | |
| 21.00 | % |
| State and Local Taxes, Net of Federal Benefit |
|
$ |
5 |
| |
| (0.02 | )% | |
| 2.62 | % |
| Foreign Tax Effects: |
|
|
|
| |
| | | |
| | |
| China - Foreign rate differential |
|
$ |
0.00 |
| |
| 0.00 | % | |
| (0.26 | )% |
| Effect of Changes in Tax Laws or Rates Enacted in the Current Period |
|
$ |
0.00 |
| |
| 0.00 | % | |
| 0.00 | % |
| Effect of Cross Border Tax Laws |
|
|
|
| |
| | | |
| | |
| FDII deduction |
|
$ |
0.00 |
| |
| 0.00 | % | |
| | |
| Tax Credits |
|
|
|
| |
| | | |
| | |
| R&D Tax Credits |
|
$ |
(3 |
) | |
| 0.01 | % | |
| 3.34 | % |
| Changes in Valuation Allowance |
|
$ |
(153 |
) | |
| 0.61 | % | |
| (27.06 | )% |
| Change in Warrant Valuation |
|
$ |
5,365 |
| |
| (21.62 | )% | |
| - | |
| Nontaxable or Non-deductible items: |
|
|
|
| |
| | | |
| | |
| Penalties |
|
$ |
2 |
| |
| 0.00 | % | |
| (0.46 | )% |
| Other non-deductible expenses |
|
$ |
0.00 |
| |
| 0.00 | % | |
| 0.00 | % |
| Changes in Unrecognized Tax Benefits |
|
$ |
0.00 |
| |
| 0.00 | % | |
| 0.00 | % |
| Other Adjustments: |
|
|
|
| |
| | | |
| | |
| Impact of Annual ETR and
Q4 loss impact |
|
$ |
0.00 |
| |
| 0.00 | % | |
| 0.00 | % |
| Effective
tax rate |
|
$ |
5 |
| |
| 0.02 | % | |
| (0.71 | )% |
|
| SCHEDULE OF COMPONENTS OF DEFERRED TAX ASSETS |
As
of March 31, 2026 and December 31, 2025, the Company had no net deferred tax assets due to a full valuation allowance recorded against
its deferred tax assets. The components of deferred tax assets and liabilities were as follows:
SCHEDULE OF COMPONENTS OF DEFERRED TAX ASSETS
| | |
March 31, | | |
December 31, | |
| | |
2026 | | |
2025 | |
| | |
| | |
| |
| Deferred tax asset attributable to: | |
| | | |
| | |
| Tax effect of net operating losses carried forward | |
$ | 277,994 | | |
$ | 290,635 | |
| Section 174 costs, net | |
| 49,891 | | |
| 66,522 | |
| Warranty liabilities | |
| 9,673 | | |
| 9,295 | |
| Inventory reserve | |
| 67,431 | | |
| 67,431 | |
| Tax credits | |
| 66,912 | | |
| 66,716 | |
| State tax | |
| (19,562 | ) | |
| (18,793 | ) |
| Lease Liability | |
| 13,312 | | |
| 27,784 | |
| Right of Use Asset | |
| (12,266 | ) | |
| (25,543 | ) |
| FIN 48 | |
| 1,392 | | |
| - | |
| Deferred tax assets | |
| 454,777 | | |
| 484,047 | |
| Less: valuation allowance | |
| (454,777 | ) | |
| (484,047 | ) |
| Deferred tax assets, net | |
$ | - | | |
$ | - | |
|
The
components of deferred tax assets are as follows:
SCHEDULE OF COMPONENTS OF DEFERRED TAX ASSETS
| | |
2025 | | |
2024 | |
| | |
December 31, | | |
December 31, | |
| | |
2025 | | |
2024 | |
| | |
| | |
| |
| Deferred tax asset attributable to: | |
| | | |
| | |
| Tax effect of net operating losses
carried forward | |
$ | 290,635 | | |
$ | 127,579 | |
| Section 174 costs, net (1) | |
| 66,522 | | |
| 125,323 | |
| Warranty liabilities | |
| 9,295 | | |
| 19,797 | |
| Inventory reserve | |
| 67,431 | | |
| 315,285 | |
| Tax credits | |
| 66,716 | | |
| 61,832 | |
| State tax | |
| (18,793 | ) | |
| (18,863 | ) |
| Lease Liability | |
| 27,784 | | |
| - | |
| Right of Use Asset | |
| (25,543 | ) | |
| - | |
| Deferred tax assets | |
| 484,047 | | |
| 630,953 | |
| Less: valuation allowance | |
| (484,047 | ) | |
| (630,953 | ) |
| Deferred
tax assets, net | |
$ | - | | |
$ | - | |
| (1) |
IRC
Section 174 Research and Development (R&D) Expense Capitalization:
The Company is subject to U.S. research and experimental (“R&E”) expense rules under IRC Section
174. Prior to the enactment of the One, Big, Beautiful Bill Act (“OBBBA”) in 2025, R&E expenditures were required to be
capitalized and amortized over five years for domestic research activities and fifteen years for foreign research activities, resulting
in temporary differences and corresponding deferred tax assets.
The OBBBA, enacted in 2025, restores the immediate deductibility of domestic R&E expenditures for tax purposes
beginning in tax years after enactment. As a result, domestic R&E costs incurred in 2025 and thereafter are fully expensed as incurred
for tax purposes, eliminating the creation of new deferred tax assets related to domestic R&E capitalization. The requirement to capitalize
and amortize foreign R&E expenditures remains unchanged.
Deferred tax assets related to previously capitalized domestic R&E expenditures continue to be amortized over
their remaining recovery periods. The Company has evaluated the impact of this legislative change and adjusted its deferred tax balances
accordingly. The enactment reduces future temporary differences associated with domestic R&E expenditures and may result in the reversal
of existing deferred tax assets over time. The impact of the OBBBA on the Company’s deferred tax assets and income tax provision
for the year ended December 31, 2025 was not material.
The enactment
of the OBBBA is not expected to have a material impact on the Company’s effective tax rate due to the Company’s valuation
allowance position. |
|
| SCHEDULE OF UNRECOGNIZED TAX BENEFITS |
A
reconciliation of the amount of unrecognized tax benefits is as follows:
SCHEDULE OF UNRECOGNIZED TAX BENEFITS
| | |
March 31, | | |
December 31, | |
| | |
2026 | | |
2025 | |
| | |
| | |
| |
| Beginning balances | |
$ | 6,627 | | |
$ | 6,627 | |
| Increases related to current year tax positions | |
| - | | |
| - | |
| Ending balances | |
$ | 6,627 | | |
$ | 6,627 | |
|
The
following table presents the aggregate changes in the balance of gross unrecognized tax benefits:
SCHEDULE
OF UNRECOGNIZED TAX BENEFITS
| | |
2025 | | |
2024 | |
| | |
Years ended | |
| | |
December
31, | |
| | |
2025 | | |
2024 | |
| | |
| | |
| |
| Beginning balances | |
$ | 6,627 | | |
$ | 6,627 | |
| Increases related to current
year tax positions | |
| - | | |
| - | |
| Ending balances | |
$ | 6,627 | | |
$ | 6,627 | |
|