v3.25.1
INCOME TAXES
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES

10. INCOME TAXES 

 

The Company had no federal income tax expense for the year ended December 31, 2024 and 2023 due to its history of operating losses. They Company did have income and franchise taxes paid to the states of West Virginia and California for 2024. The following is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate:

 

   Year-Ended December 31, 2024   Year-Ended December 31, 2023 
Federal statutory tax rate   -21%   -21%
State tax rate, net of federal benefit   -7%   -7%
Total federal and state tax rate   -28%   -28%
Valuation allowance   28%   28%
Effective tax rate   -%   -%

 

Deferred tax assets and liabilities consist of the following:

 

   December 31, 2024   December 31, 2023 
         
Net deferred tax assets:          
Net operating loss carryforwards  $5,358,900   $4,718,000 
Stock-based compensation   3,525,900    3,506,000 
Goodwill   -    187,000 
Research credits   -    342,000 
Other Capitalized Costs   -    208,000 
Operating lease liability   -    - 
Gross deferred tax assets   8,884,800    8,961,000 
Less: valuation allowance   (7,710,300)   (6,944,000)
Total deferred tax assets   1,174,500    2,017,000 
Deferred tax liabilities:          
Derivative income   1,108,000    1,108,000 
Fixed Assets   66,500    909,000 
Operating lease right-of-use asset   -    - 
Total deferred tax liabilities   1,174,500    2,017,000 
           
Net deferred income tax assets (liabilities)  $-   $- 

 

 

The provisions of ASC Topic 740, Accounting for Income Taxes, require an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. For the years ended December 31, 2024 and 2023, based on all available objective evidence, including the existence of cumulative losses, the Company determined that it was more likely than not that the net deferred tax assets were not fully realizable. Accordingly, the Company established a full valuation allowance against its net deferred tax assets. The Company intends to maintain a full valuation allowance on net deferred tax assets until sufficient positive evidence exists to support reversal of the valuation allowance. During the year ended December 31, 2024 and the year ended December 31, 2023, the valuation allowance changed by $0.8 million and $2.2 million, respectively.

 

At December 31, 2024 and December 31, 2023, the Company had available federal and state net operating loss carryforwards (“NOLs”) to reduce future taxable income. Due to restrictions imposed by Internal Revenue Code Section 382 regarding substantial changes in ownership of companies with loss carryforwards, the utilization of the Company’s NOLs may be limited as a result of changes in stock ownership. For Federal purposes, after considering limitations under Section 382, the net operating loss amounts available were approximately $19.2 million and $16.9 million as of December 31, 2024 and December 31, 2023, respectively. For state purposes, after considering limitations under Section 382, the net operating loss amounts available were approximately $16.5 million as of December 31, 2024 and $16.6 million as of December 31, 2023. NOLs incurred subsequent to the latest change in control are not subject to the Section 382 limitation. The Federal carryforwards generated prior to December 31, 2017 expire on various dates through 2037, and Federal carryforwards generated after December 31, 2017 do not expire but are limited to 80% utilization in a given period.