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

INCOME TAXES

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

NOTE 13 – INCOME TAXES

 

Deferred taxes are determined by applying the provisions of enacted tax laws and rates for the jurisdictions in which the Company operates to the estimated future tax effects of the differences between the tax basis of assets and liabilities and their reported amounts in the Company’s financial statements. A valuation allowance is established to reduce deferred tax assets if it is more likely than not that the related tax benefits will not be realized.

 

Due to losses since inception and for all periods presented, no income tax benefit or expense has been recognized as a full valuation allowance has been established for any tax benefit that would have been recognized for the loss in any period presented.

 

The components of income tax expense (benefit) for the year ended December 31, 2024 and 2023 are as follows:

           
    2024     2023  
             
Expected federal income tax benefit at statutory rate   $ (9,557,165 )   $ 9,464,954  
Non-deductible expenses     3,594,293       1,183,767  
Write off of deferred tax asset for stock-based compensation     3,235,732       –  
Return to provision and true ups     345,266       108,959  
Change in valuation allowance     2,381,874       (10,757,680 )
Income tax benefit   $ –     $ –  

 

The non-deductible expenses for the year ended December 31, 2024 includes the loss on the extinguishment of the Convertible Notes of $345,998, interest expense on the Convertible Notes of $66,116, and loss recognized on the November 2023 Warrants classified as liabilities of $3,101,361, and other non-deductible expenses of $80,818. Due to the impact of the reverse stock split in June 2024 on the adjusted number of outstanding options and exercise prices, the Company concluded that it was a remote possibility that any options will be exercised and therefore wrote off the deferred tax asset and related valuation allowance for stock-based compensation.

 

Significant components of the Company’s deferred tax assets and liabilities at December 31, 2024 and December 31, 2023 are as follows:

           
   

December 31,

2024

    

December 31,

2023

  
Deferred tax assets                
Net operating losses   $ 20,932,619     $ 15,468,757  
Debt basis difference     –       5,121,397  
Depreciation and amortization     1,562,438       1,701,768  
Research & development credit     1,099,535       1,099,535  
Lease liability     162,786       246,704  
Stock-based compensation     –       3,235,732  
Inventory     –       152,749  
Accrued expenses     94,561       66,909  
Capital loss carryover     178,442       176,950  
Dealer rebates     12,052       459,713  
Vendor settlements and reserves     689,253       –  
Other     29,502       21,828  
Total     24,761,188       27,752,042  
Valuation allowance     (24,431,492 )     (27,171,016 )
Net deferred tax asset     329,696       581,026  
Deferred tax liabilities                
Prepaid expenses     (174,457 )     (342,421 )
Right-of-use assets     (155,239 )     (238,605 )
Total net deferred taxes deferred tax liabilities   $ –     $ –  

 

Management currently believes that since the Company has a history of losses it is more likely than not that the deferred tax regarding the loss carry forwards and other temporary differences will not be realized in the foreseeable future. The utilization of the Company’s net operating losses and credit carryovers may be subject to limitation due to the “change in ownership provisions” under Section 382 of the Internal Revenue Code. The Company’s cumulative net operating loss carry forward of $99.7 million as of December 31, 2024, may be limited in future years depending on future taxable income in any given fiscal year. The net operating losses can be carried forward indefinitely.

 

The Company has recorded no liability for income taxes associated with unrecognized tax benefits at the date of adoption and has not recorded any liability associated with unrecognized tax benefits. Accordingly, the Company has not recorded any interest or penalty in regard to any unrecognized benefit.