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

NOTE 8. INCOME TAXES

  

Tax Cuts and Jobs Act (TCJA) — Impact on NOL Carryforward Rules 

 

On December 22, 2017, the U.S. federal government enacted the Tax Cuts and Jobs Act (the “2017 Tax Act”). The 2017 Tax Act reduced the federal corporate income tax rate from 35% to 21%, effective January 1, 2018, and significantly modified net operating loss (NOL) carryforward rules under IRC §172, as follows: 

 

  ● For NOLs arising in tax years before January 1, 2018: carryback 2 years and carryforward 20 years, at 100% offset of taxable income.
     
  ● For NOLs arising in tax years beginning after December 31, 2017: no carryback, indefinite carryforward, but utilization limited to 80% of taxable income in any given year, per IRC §172 as amended by TCJA. 

 

The re-measurement of deferred taxes at the new 21% corporate rate reduced the Company’s net deferred tax assets, before valuation allowance, by approximately $2.2 million upon enactment. Due to the full valuation allowance maintained at that time, the change in deferred taxes was fully offset by a corresponding change in the valuation allowance with no net income statement impact, consistent with ASC 740-10-45-15.

 

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

 

    2025    2024 
Current taxes:          
Federal  $—   $— 
           
Total current taxes   —    — 
Deferred tax provision (benefit)   —    — 
           
Income tax provision (benefit)  $—   $— 

 

 

A reconciliation of the income tax (provision) benefit at the statutory rate of 21% for the years ended December 31, 2025 and 2024 to the Company’s effective tax rate is as follows: 

 

   2025   2024 
U.S. Statutory tax rate   21.0%   21.0%
Change in valuation reserve on deferred tax assets   (21)%   (21)%
           
Income tax (provision) benefit   —%   —%

  

Significant components of the Company’s deferred tax assets (liabilities) as of December 31, 2025 and 2024 are as follows: 

  

Rate Reconciliation

 

In accordance with ASU 2023-09, the following table presents the rate reconciliation in both percentage and dollar amounts for the years ended December 31, 2025 and 2024: 

  

  

Year Ended

December 31,

2025

  

Year Ended

December 31,

2024

 
   Amount   Percentage   Amount   Percentage 
Tax benefit at U.S. federal statutory rate (21%)  $(1,993,222)   21.0%  $(166,687)   21.0%
State income taxes, net of federal benefit   —    0.0%   —    0.0%
Change in valuation allowance   1,993,222    21.0%   166,687    21.0%
Effective income tax rate  $—    0.0%  $—    0.0%

 

  

   2025   2024 
Deferred tax assets:        
Net operating loss carryforwards  $1,674,489   $1,200,018 
Stock-based compensation   1,648,922    130,172 
Total deferred tax assets   3,323,412    1,330,190 
Valuation allowance   (3,323,412)   (1,330,190)
           
Net deferred tax assets (liability)  $—   $— 

 

Net Operating Loss Carryforwards. 

  

As of December 31, 2025 and 2024, the Company had federal NOL carryforwards of approximately $7,973,759 and $5,714,370, respectively. Of the 2025 balance, approximately $4,924,619 relates to pre-2018 vintages subject to the 20-year carryforward period (expiring 2026–2037), and approximately $3,049,140 relates to post-2017 vintages with indefinite carryforward, subject to the 80% annual taxable income utilization limit under IRC §172 as amended by TCJA.

 

The NOL carryforwards are segregated by vintage year and subject to different expiration and utilization rules as follows: 

  

Tax Year   NOL
Amount		   Expiration   Applicable Rules
 2006   $509,749    2026   Subject to 20-year expiration limit
 2007   $807,208    2027   Subject to 20-year expiration limit
 2009   $778,247    2029   Subject to 20-year expiration limit
 2010   $294,973    2030   Subject to 20-year expiration limit
 2011   $417,724    2031   Subject to 20-year expiration limit
 2012   $448,045    2032   Subject to 20-year expiration limit
 2013   $294,807    2033   Subject to 20-year expiration limit
 2014   $311,759    2034   Subject to 20-year expiration limit
 2015   $349,180    2035   Subject to 20-year expiration limit
 2016   $627,123    2036   Subject to 20-year expiration limit
 2017   $85,804    2037   Subject to 20-year expiration limit
 2018   $235,550    Indefinite   80% taxable income limit (TCJA §172)
 2019   $83,826    Indefinite   80% taxable income limit (TCJA §172)
 2020   $70,828    Indefinite   80% taxable income limit (TCJA §172)
 2021   $98,362    Indefinite   80% taxable income limit (TCJA §172)
 2022   $57,428    Indefinite   80% taxable income limit (TCJA §172)
 2023   $69,875    Indefinite   80% taxable income limit (TCJA §172)
 2024   $173,882    Indefinite   80% taxable income limit (TCJA §172)
 2025   $2,259,389    Indefinite   80% taxable income limit (TCJA §172)
 Total   $7,973,759         

  

 

IRC §382 Limitations.

 

The Company’s ability to utilize NOL carryforwards may be limited under IRC §382 if cumulative ownership changes exceed 50% within any three-year period. Management is monitoring for potential ownership changes and will conduct a formal §382 analysis as warranted.

 

Valuation Allowance.

 

A 100% valuation allowance of $3,323,412 (2025) and $1,330,190 (2024) has been established against net deferred tax assets. The $1,993,222 increase reflects current-year losses. Management determined it is more likely than not that the deferred tax assets will not be realized based on the Company’s history of cumulative losses and uncertainty of generating sufficient future taxable income.

  

Income Taxes Paid

 

In accordance with ASU 2023-09, the following discloses cash paid for income taxes for the years ended December 31, 2025 and 2024: 

  

    2025    2024 
Cash paid for federal income taxes  $—   $— 
Cash paid for state income taxes   —    — 
           
Total cash paid for income taxes  $—   $— 

 

Uncertain Tax Positions

 

As of December 31, 2025 and 2024, there are no material uncertain tax positions requiring recognition. No interest or penalties related to income taxes have been accrued. Tax years 2022 through 2025 remain open for examination.