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 15. INCOME TAXES

 

Deferred tax assets and valuation allowance

 

The Company had, subject to limitation, approximately $31 million of net operating loss carryforwards at December 31, 2024, of which approximately $0.67 million will begin expiring in 2034. The remaining balance of approximately $30 million will carry forward indefinitely. A 100% valuation allowance has been provided for the deferred tax benefits resulting from the net operating loss carryover due to a lack of earnings history. In addressing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are deductible. The valuation allowance increased by approximately $2.0 million and $3.0 million for the years ended December 31, 2024 and 2023, respectively. Significant components of deferred tax assets are as follows:

 

             
    December 31,  
    2024     2023  
Deferred tax assets:                
Net operating loss carryover   $ 8,185,845     $ 6,479,696  
Stock compensation     247,574       325,320  
Capitalized R&E costs     662,855       525,463  
Bad debt expense     203,323       145,777  
Other     107,538       58,236  
Operating lease liabilities     274,962       79,319  
Tax credits     480,724       332,690  
Total deferred tax assets     10,162,821       7,946,501  
Deferred tax liability:                
Right-of-use asset tax liability   $ (261,215 )   $ (77,766 )
Depreciation and amortization     (50,463 )     (59,248 )
Total deferred tax liability     (311,678 )     (137,014 )
Less: valuation allowance     (9,851,143 )     (7,809,487 )
 Deferred tax assets (liabilities), net   $     $  

 

The reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the years ended December 31, 2024 and 2023, was as follows:

 

             
    December 31,  
    2024     2023  
Tax at federal statutory rate     -21.00 %     -21.00 %
Permanent differences     0.1 %     0.03 %
Research and development credits     -0.8 %     -0.83 %
Deferred balance true-up     0.00 %     -16.07 %
Change in valuation allowance     21.7 %     37.87 %
Effective income tax rate     0.00 %     0.00 %

 

Unrecognized tax benefits

 

As of December 31, 2024, and 2023, the Company has unrecognized tax benefits related to tax credits of $281,207 and $249,516, respectively. None of the unrecognized tax benefits as of December 31, 2024, if recognized, would impact the effective tax rate due to the valuation allowance, and no interest or penalties have been recognized. A reconciliation of the beginning and ending balance of unrecognized tax benefits is as follows:

 

             
    December 31,  
    2024     2023  
Beginning balance   $ 249,516     $ 190,228  
Deductions based on tax positions related to the prior year           30,897  
Additions based on tax positions related to the current year     31,691       28,391  
Ending balance   $ 281,207     $ 249,516