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

Note 14 - Income Taxes

v3.25.1
Note 14 - Income Taxes
 12 Months Ended
Dec. 31, 2024
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

14. Income Taxes

 

The Company has the following net deferred tax assets and liabilities:

 

   

December 31,

  
   

2024

    

2023

  

Goodwill and intangible assets

   $ 425,865     $ 83,613  

Developed technology

     2,866       3,953  

Property and equipment

     (12,565 )     (9,970 )

Other deferred tax assets

     320,815       264,571  

Settlements

     121,950       121,950  

Stock based compensation

     103,551       76,977  

Net operating loss

     10,365,248       10,216,313  

Valuation allowance

     (11,327,730 )     (10,757,407 )

Net deferred tax liability

   $ -     $ -  

 

The benefit for income taxes for the years ended December 31, 2024, and 2023, consists of the following:

 

   

Year Ended December 31,

  
   

2024

    

2023

  

Federal:

                

Current provision

   $ -     $ -  

Deferred tax benefit

     -       (110,961 )
    $ -     $ (110,961 )

State:

                

Current provision

   $ 6,321     $ -  

Deferred tax benefit

     -       (28,419 )
    $ 6,321     $ (28,419 )

Foreign:

                

Current provision

   $ -     $ -  

Deferred provision (benefit)

     -       -  
    $ -     $ -  

Income tax expense benefit

   $ 6,321     $ (139,380 )

 

A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:

 

   

Year Ended December 31,

  
   

2024

    

2023

  

Expected federal statutory rate

     21.0 %     21.0 %

State income taxes, net of federal benefit

     6.1 %     6.1 %

Valuation allowance

     (21.9 )%     (17.1 )%

Permanent items

     (1.0 )%     0.0 %

Other

     (4.2 )%     (6.9 )%
      (0.0 )%     3.1 %

 

The valuation allowance at December 31, 2024 was $11,327,730. The net change in the valuation allowance during the year ended December 31, 2024 was an increase of $570,323. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on consideration of these items, management has determined that enough uncertainty exists relative to the realization of the deferred income tax asset balances to warrant the application of a valuation allowance as of December 31, 2024.

 

At December 31, 2024, the Company had U.S. federal, Illinois, and New York net operating loss carryforwards of approximately $39,550,000, $21,089,000, and $11,995,000 respectively. Of the federal amount, $19,304,000 expires between 2034 and 2038, and $20,246,000 has an indefinite carryforward period. The Illinois losses may be carried forward 12 years and begin to expire in 2026. The New York losses may be carried forward 20 year and begin to expire in 2035. Certain tax attributes are subject to an annual limitation as a result of changes in ownership as defined under Internal Revenue Code Section 382. The Company files tax returns in multiple jurisdictions and is subject to examination in these jurisdictions. Significant jurisdictions in the U.S. include New York and Illinois.

 

The U.S. Tax Cuts and Jobs Act of 2017 provided for a one-time deemed mandatory repatriation of post-1986 undistributed foreign earnings and profit (“E&P”) through the year ended December 31, 2017. Due to the seizure of cash, by Chinese local authorities, the Company’s undistributed foreign E&P has been reduced to $0.