NOTE 2 – RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

 

In connection with a nexus study conducted with an external tax advisor, the Company’s management identified errors in previously issued financial statements. Management prepared a quantitative and qualitative analysis of the errors described below, in accordance with the SEC Staff's Accounting Bulletin ("SAB") Nos. 99 Materiality and No. 108, Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, and concluded the aggregate impact of all the errors is material to the Company's previously reported financial statements as of and for the years ended December 31, 2025 and 2024. As a result, the Company’s management and the Audit Committee of the Company’s Board of Directors concluded that it is appropriate to restate the Company’s previously issued audited financial statements as of and for the years ended December 31, 2025 and 2024, as previously reported in its Form 10-K.

 

The accompanying financial statements as of and for the year ended December 31, 2025 and 2024 have been restated from amounts previously reported. The restated classification and reported values of the errors noted from the nexus study are included in the financial statements herein. The Company has also restated related amounts within the accompanying footnotes to the financial statements to conform to the corrected amounts in the financial statements.

 

Description of Restatement Errors

 

Based on a nexus study, the Company determined that it had economic and physical nexus in state and local jurisdictions where it historically had not been collecting and remitting sales and use tax and filing income taxes. As a result, the Company concluded that it had a historical state sales and use tax liability and income tax liability related to prior periods. The Company subsequently pursued Voluntary Disclosure Agreements (“VDAs”) to address this liability and to mitigate future exposure based on counsel of its tax advisor.

 

The liability includes an estimate for each state, to account for any interest that is due on the base tax amount owed. The error resulted in an understatement of accrued expenses for state and local sales tax and income tax, including related interest in the previously issued financial statements as of and for the years ended December 31, 2025 and 2024. As a result of correcting this liability, selling, general and administrative expenses; income tax expense; and interest expense were increased in the affected periods. The underlying sales tax obligations are appropriately recognized and the Company is in various stages of VDA review, submission, acceptance and payment with the states impacted. The Company has subsequently engaged an independent third party provider of automated sales tax solutions to support with compliance through continuous identification, monitoring and evaluation of our transaction activity and physical presence.

 

Financial Statements - Restatement Reconciliation Tables

 

In accordance with Accounting Standards Codification ("ASC") 250, Accounting Changes and Error Corrections, the Company has corrected this error by restating previously issued financial statements.

The following tables summarize the effect of the restatement on each financial statement line item as of the dates, and for the periods indicated. The amounts in the "As Restated" columns are the updated amounts including the impacts from the restatement. Financial statement line items and subtotals that were not impacted by the restatement adjustments have been omitted for enhanced clarity.

 

Balance Sheet – as of December 31, 2025:

 

		As Previously Reported				Adjustment				As Restated
Deferred tax assets		$	-			$	58,709			$	58,709
Total assets			26,237,315				58,709				26,296,024
Accrued expenses			2,160,366				1,907,251				4,067,617
Total current liabilities			13,293,479				1,907,251				15,200,730
Deferred tax liabilities			355,646				(355,646	)			-
Total liabilities			13,883,222				1,551,605				15,434,827
Accumulated deficit			(18,054,278	)			(1,492,896	)			(19,547,174	)
Total stockholders’ equity		$	12,354,093			$	(1,492,896	)		$	10,861,197

		As Previously Reported				Adjustment				As Restated
Accrued expenses		$	1,931,281			$	1,260,238			$	3,191,519
Total current liabilities			13,137,858				1,260,238				14,398,096
Deferred tax liabilities			481,420				(274,112	)			207,308
Total liabilities			13,770,752				986,126				14,756,878
Accumulated deficit			(19,072,209	)			(986,126	)			(20,058,335	)
Total stockholders’ equity		$	11,141,746			$	(986,126	)		$	10,155,620

		As Previously Reported				Adjustment				As Restated
Selling, general, and administrative expenses		$	10,268,850			$	501,443			$	10,770,293
Total operating expenses			19,541,585				501,443				20,043,028
Income from operations			582,031				(501,443	)			80,588
Other income, net			745,955				(109,241	)			636,714
Income before income taxes			1,327,986				(610,684	)			717,302
Provision for income taxes			(310,055	)			103,914				(206,141	)
Net income			1,017,931				(506,770	)			511,161
Net income per share – Basic and diluted		$	0.09			$	(0.04	)		$	0.05

		As Previously Reported				Adjustment				As Restated
Selling, general, and administrative expenses		$	9,536,492			$	513,142			$	10,049,634
Total operating expenses			18,560,339				513,142				19,073,481
Income from operations			1,249,542				(513,142	)			736,400
Other income, net			918,572				(65,651	)			852,921
Income before income taxes			2,168,114				(578,793	)			1,589,321
Provision for income taxes			(493,212	)			210,484				(282,728	)
Net income			1,674,902				(368,309	)			1,306,593
Net income per share – Basic and diluted		$	0.16			$	(0.04	)		$	0.12

		As Previously Reported				Adjustment				As Restated
Year Ended December 31, 2024
Accumulated deficit		$	(19,072,209	)		$	(986,126	)		$	(20,058,335	)
Total stockholders’ equity			11,141,746				(986,126	)			10,155,620
Year Ended December 31, 2025
Accumulated deficit		$	(18,054,278	)		$	(1,492,896	)		$	(19,547,174	)
Total stockholders’ equity			12,354,093				(1,492,896	)			10,861,197

		As Previously Reported				Adjustment				As Restated
Year Ended December 31, 2024
Cash flows from operating activities:
Net income		$	1,674,902			$	(368,309	)		$	1,306,593
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes			130,815				(274,112	)			(143,297	)
Changes in operating assets and liabilities:
Accrued expenses			(173,738	)			642,421				468,683
Year Ended December 31, 2025
Cash flows from operating activities:
Net income		$	1,017,931			$	(506,770	)		$	511,161
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes			(125,774	)			(140,243	)			(266,017	)
Changes in operating assets and liabilities:
Accrued expenses			229,085				647,013				876,098

The restatement had no effect on the total cash flows from operations, investing activities, or financing activities of the Company.