Annual report [Section 13 and 15(d), not S-K Item 405]

Income Taxes

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

Note 9 - Income Taxes  

 

The components of deferred taxes are as follows:

 

               
    Year Ended December 31,
    2024   2023
Deferred tax assets:                
Net operating loss carry forwards   $ 2,277,000     $ 2,444,000  
Operating Lease – Right of Use Asset     172,496       —  
Other     —       195,000  
Total deferred tax assets     2,449,496       2,639,000  
Deferred tax liabilities:                
 Property and equipment     (521,358 )     —  
Intangibles     (120,123 )     (225,000 )
Goodwill      (195,154 )     —  
Right of Use Liability     (158,947 )     —  
Other     —       (65,000 )
Total deferred tax liabilities     (995,582 )     (290,000 )
                 
Valuation Allowance     (1,492,945 )     (2,349,000 )
                 
Net deferred taxes   $ (39,031 )   $ —  

  

The Company had federal and state net operating tax loss carry-forwards of $7,526,435 and $11,185,137,  respectively as of December 31, 2024. The tax loss carry-forwards are available to offset future taxable income with the federal and state carry-forwards beginning to expire in 2029.

 

During the tax year, the Company claimed a tax credit related to the amortization of goodwill for US federal income tax purposes. However, the tax position underlying the credit may not have the appropriate economic substance to support the claim under current US federal income tax law. The Company is recognizing a naked credit associated with goodwill, where the tax deduction has been claimed based on goodwill that may not be associated with a qualifying transaction as required under income tax provisions.

 

As of tax year ended December 31, 2024, management has reviewed the relevant tax laws and believes that the tax positions taken are reasonable. Given the potential for challenge by tax authorities, the Company may be exposed to the risk that the credits taken may not be sustained upon examination, which may result in additional tax liabilities and penalties. The amount of any potential tax adjustments to the credits have not been determined at this time.

 

A reconciliation of the Company’s effective income tax rate to the expected income tax rate, computed by applying the federal statutory income tax rate of 21.0% for each of the years ended December 31, 2024 and 2023 to the Company’s loss before provision (benefit) for income taxes, is as follows:

 

               
    2024   2023
U.S. Federal Statutory Rate     21.0 %     21.0 %
State Taxes     6.9 %     7.3 %
                 
Other permanent and prior period adjustments     5.7 %     9.1 %
Valuation allowance     (37.0 )%     (37.4 )%
Income tax provision     — %     — %