AIxCrypto Holdings, Inc. Income Taxes Disclosure

NOTE 18 — INCOME TAXES

 

The following table presents domestic and foreign components of consolidated loss before income taxes from continuing operations for the periods presented:

 SCHEDULE OF DOMESTIC AND FOREIGN COMPONENTS

		December 31, 2025				December 31, 2024
Domestic			(16,965,875	)			(6,152,857	)
Foreign			-				-
Loss before provision for income taxes			(16,965,875	)			(6,152,857	)

 

Beginning in 2025 annual reporting, we adopted ASU 2023-09 prospectively. A reconciliation of the statutory income tax rates and the Company’s effective tax rate is as follows:

 SCHEDULE OF RECONCILIATIONS OF STATUTORY INCOME TAX RATE

		Amount				Percent
		December 31, 2025
		Amount				Percent
U.S. Federal Statutory Tax Rate			(3,562,676	)			21.00	%
State taxes, net of federal income tax effect*			(828,843	)			4.89	%
Foreign Tax Effects			-				-
NOL expiration
Effect of Changes in Tax Laws or Rates Enacted in the Current Period			-				-
Effect of Cross-Border Tax Laws			-				-
Tax Credits
Research and development tax credits			8,285				-0.05	%
Change in FV of warrant liability
Tax impact of convertible debenture
Tax impact of divestiture
Changes in Valuation Allowances			589,175				-3.47	%
Nontaxable or Nondeductible Items
Non-deductible expenses			120,826				-0.71	%
Stock compensation			108,017				-0.64	%
Changes in Unrecognized Tax Benefits			(254,408	)			1.50	%
Other Adjustments
Tax impact of section 382 attribute forfeiture			3,820,144				-22.52	%
True-up			(521	)			0.00	%
Income taxes provision (benefit)		$	0				0.00	%

 

 

The following table presents required disclosures prior to the adoption of ASU 2023-09 and displays the reconciliation between statutory federal income taxes and the total income tax provision (benefit):

 

		December 31, 2024
Statutory federal income tax rate			21.00	%
State taxes, net of federal tax benefit			5.90	%
Non-deductible expenses			0.02	%
NOL expiration			0.00	%
Tax credit			-3.87	%
Change in FV of warrant liability			1.42	%
Tax impact of convertible debenture			-4.18	%
Tax impact of divestiture			0.00	%
Tax impact of section 382 attribute forfeiture			-202.84	%
Stock compensation			-53.37	%
True-up			-2.87	%
Change in valuation allowance			238.69	%
Income taxes provision (benefit)			-0.10	%

 

The provision for income taxes includes the following:

 SCHEDULE OF PROVISION FOR INCOME TAXES

		December 31, 2025				December 31, 2024
Current
US Federal		$	-			$	-
US State			-				6,334
US Foreign			-
Total current provision			-				6,334
Deferred
US Federal			(589,000	)			6,069,000
US State			(315,000	)			8,617,000
US Foreign			-				-
Total deferred benefit			(904,000	)			14,686,000
Change in valuation allowance			904,000				(14,686,000	)
Total provision for income taxes		$	-			$	6,334

 

 

The components of deferred tax assets and liabilities are as follows:

 SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES

		December 31, 2025				December 31, 2024
Deferred tax assets
Net operating loss		$	1,234,000			$	1,626,000
Research and development credits			-				254,000
Accrued expenses			-				13,000
Stock compensation			37,000				145,000
Unrealized loss on digital assets			757,000				-
Provision for losses on notes receivable			1,275,000				101,000
Research and development expenses			703,000				963,000
Total deferred income tax assets			4,006,000				3,102,000
Net deferred income tax assets			4,006,000				3,102,000
Valuation allowance			(4,006,000	)			(3,102,000	)
Deferred tax asset, net of allowance		$	-			$	-

 

During 2025 and 2024, the aggregate changes in our total gross amount of unrecognized tax benefits are summarized as follows:

 SCHEDULE OF UNRECOGNIZED TAX BENEFITS

		December 31, 2025				December 31, 2024
Gross unrecognized tax benefits at the beginning of the year			279,105				-
Increases (decreases) related to current year positions			-				8,285
Increases (decreases) related to prior year positions			(279,105	)			270,820
Expiration of unrecognized tax benefits			-
Gross unrecognized tax benefits at the end of the year		$	-			$	279,105

 

The table below provides the updated requirements of ASU 2023-09 for cash paid for income taxes, net of refunds.

 SCHEDULE OF INCOME TAX NET OF REFUNDS

		December 31, 2025				December 31, 2024
Cash paid for income taxes, net of refunds
Federal		$	-			$	-
State			-				6,334
Foreign			-				-
Total cash paid for income taxes, net of refunds		$	-			$	6,334

 

 

Based on the available objective evidence, including the Company’s history of cumulative losses, management believes it is likely that the Company’s U.S. federal and state net deferred tax assets will not be realizable. Accordingly, the Company provided for a full valuation allowance against its U.S. federal and state net deferred tax assets at December 31, 2025, and December 31, 2024.

 

Due to the full valuation allowance already in place on the Company’s U.S. federal and state net deferred tax assets, the Company does not anticipate significant changes in the Company’s effective tax rate.

 

Changes to US tax law enacted on July 4, 2025, allow for immediate expensing of domestic research and experimentation costs, accelerated depreciation on eligible capital expenditures, and other tax law changes impacting 2025 with certain changes effective in 2026. These changes are reflected in our results for the year ended December 31, 2025, and did not have a material impact on the Company’s effective tax rate in 2025.

 

At December 31, 2025, the Company has U.S. federal and state net operating loss carryforwards of approximately $4,602,000 and $3,831,000, respectively, which are available to offset future taxable income. U.S. federal net operating loss carryforwards can be carried forward indefinitely. State net operating loss carryovers begin to expire in 2044.

 

The Company’s net operating loss and tax credit carryforwards may be subject to an annual limitation under sections 382 and 383 of the Internal Revenue Code of 1986 (the “Code”), and similar state provisions if the Company experienced one or more ownership changes, which would limit the amount of net operating loss and tax credit carryforwards that may be utilized to offset future taxable income and tax, respectively. In general, an ownership change, as defined by section 382, results from equity shifts that increase ownership of certain stockholders or public groups in the stock of the corporation of more than 50% over a three-year period. As a result of the September 2025 subscription agreement, a section 382 ownership change has occurred. After the consummation of the agreement, the Qualigen business has been substantially reduced resulting in any pre-ownership change net operating loss and tax credit carryforwards becoming fully limited under section 382. The pre-ownership change net operating losses and tax credit carryforward DTAs are considered worthless and have been written-off the deferred tax table presented above. The Company has not completed an Internal Revenue Code Section 382 analysis.

 

The Company files income tax returns in the U.S. federal jurisdiction and in California. The Company’s U.S. federal income tax returns remain subject to examination by the Internal Revenue Service. The Company’s California income tax returns remain subject to examination by the California Franchise Tax Board. The companies tax returns for calendar year 2022 and forward are subject to examination by the U.S. federal and state tax authorities.

 

Generally accepted accounting principles clarify the accounting for uncertainty in income taxes recognized in the Company’s financial statements and prescribe thresholds for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and also provide guidance on de-recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company adopted these provisions effective April 1, 2009.

 

 

The Company had unrecognized tax benefits of $0 as of December 31, 2025. Due to the existence of the valuation allowance, future changes in unrecognized tax benefits would have no effect on the Company’s effective tax rate. The Company does not foresee any material changes over the next 12 months. In accordance with generally accepted accounting principles, the Company will recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. As of December 31, 2025, the Company has not accrued any interest or penalties related to uncertain tax positions.