NOTE 6 - INCOME TAXES 

Effective January 1, 2025, the Company adopted ASU 2023-09, Income Taxes: Improvements to Income Tax Disclosures. The amendments in ASU 2023-09 enhance the transparency and decision usefulness of income tax disclosures by requiring, among other things, (i) expanded rate reconciliation disclosures with specified categories presented both in dollar amounts and as a percentage of pretax loss, and (ii) disaggregation of income taxes paid (net of refunds) by federal, state and foreign jurisdictions, including separate disclosure of material jurisdictions.  

The disclosures for the year ended December 31, 2024 were prepared in accordance with the income tax disclosure requirements of ASC 740-50 prior to the adoption of ASU 2023-09, and are presented in the format previously required.  Accordingly, the 2024 rate reconciliation and related disclosures reflect the previously required categories and disclosure objectives under the prior guidance and are not required to be reformatted under the new standard.

The components of income tax benefit from operations consisted of the following:

The effective income tax rate reconciliation for the year ended December 31, 2025 is presented in accordance with ASU 2023-09 and includes reconciling items required to be separately disclosed if they meet a quantitative threshold of 5% or more of the amount computed by multiplying pretax loss by the applicable U.S. federal statutory income tax rate. Reconciling items below the disclosure threshold are aggregated within “Other”.  The Company’s effective tax rate for the year ended December 31, 2025 differs from U.S. federal statutory rate primarily due to changes in valuation allowances recorded against deferred tax assets and non-deductible expenses.  The Company continues to maintain a full valuation allowance against certain deferred tax assets as realization is more likely than not based on current evidence.

A reconciliation between the effective tax rate on income from continuing operations and the statutory tax rate is as follows for December 31, 2024:

The effective tax rate for the years ended December 31, 2025 and 2024, respectively, was 17.56% and 11.44% for Federal tax and State tax rate was 5.5% in 2025 and in 2024.

Cash Taxes Paid (Net of Refunds Received) in the Current Period

* There are no single states that meet the 5% disaggregation threshold.         

Pretax loss from continuing operations is disaggregated between U.S. domestic and foreign jurisdictions in accordance with ASU 2023-09 and is presented in the table below for the year ended December 31, 2025.

Income Taxes

Deferred tax assets and liabilities as of December 31, 2025 and 2024 consisted of the following:

Deferred tax assets are recognized for deductible temporary differences and net operating loss carryforwards, while deferred tax liabilities are recognized for taxable temporary differences. Deferred tax asset and liabilities are measured using enacted tax rates expected to apply in periods in which those temporary differences are expected to be realized or settled. The Company evaluates the realizability of its deferred tax assets and establishes a valuation allowance when it is more likely than not that some portion or all of the deferred assets will not be realized. In making this determination, management considers all available positive and negative evidence, including cumulative losses in recent years, the lack of current-revenue generating operations, and uncertainty regarding the timing and level of future taxable income. Based on this evaluation, the Company has concluded that it is more likely than not that its deferred tax assets will not be realized and has therefore recorded a full valuation allowance against its gross deferred tax assets as of December 31, 2025 and 2024.

Deferred tax assets and liabilities are presented on a net basis by jurisdiction. As of December 31, 2024, the Company had a net deferred tax liability of $195,958, primarily related to taxable temporary differences associated with intangible assets. This net deferred tax liability represented a naked credit as the Company’s deferred tax assets were fully offset by a valuation allowance.

During the year ended December 31, 2025, the deferred tax liability associated with intangible assets was eliminated. As a result, the Company recognized an income tax benefit of $195,958 related to the reversal of this liability. This benefit was recorded notwithstanding the full valuation allowance against deferred tax assets, as the valuation allowance does not apply to deferred tax liabilities.

As of December 31, 2025, after netting deferred tax assets and liabilities and considering the full valuation allowance, the Company reports no deferred tax assets or liabilities on its consolidated balance sheet. The Company’s valuation allowance decreased by $566,596 during the year ended December 31, 2025, primarily due to changes in deductible temporary differences and net operating loss carryforwards.

As of December 31, 2025 and 2024, the Company had federal net operating loss carry forwards of $4,586,580 and $6,672,056 and state operating loss carry forwards of $4,445,104 and $7,062,042, respectively. Federal net operating losses generated in tax years beginning before January 1, 2018 generally expire 20 years from the year generated, while federal net operating losses generated in tax years beginning after December 31, 2017 generally may be carried forward indefinitely. The use of post-2017 federal net operating losses is generally limited to 80% of taxable income in any one year .

Income taxes paid are disaggregated by federal, state, and foreign jurisdictions.  Individual jurisdictions are separately disclosed if net payments exceed 5% of total income taxes paid during the period.  No individual state or foreign jurisdiction met this threshold for the year ended December 31, 2025.

The Company’s policy is to record interest and penalties associated with unrecognized tax benefits as additional income taxes in the statement of operations. As of January 1, 2025, the Company had no unrecognized tax benefits and no charge during 2025, and accordingly, the Company did not recognize any interest or penalties during 2025 related to unrecognized tax benefits. There is no accrual for uncertain tax positions as of December 31, 2025.