LifeMD, Inc. Income Taxes Disclosure

NOTE 14 – INCOME TAXES

 

As of December 31, 2025 and 2024, the Company had federal net operating loss carryforwards of $109.8 million and $102.8 million, respectively. As of December 31, 2025 and 2024, the Company had state net operating loss carryforwards of $42.0 million and $38.6 million, respectively. Federal net operating loss carryforwards of $3.9 million could be subject to limitation if upon further analysis a change in ownership as defined by Internal Revenue Code Section 382 is determined to have occurred. All remaining net operating loss carryforwards were generated after 2017 and can be carried forward indefinitely.

 

The change in valuation allowance for the year ended December 31, 2025 of $19.0 million relates to: (1) federal and state jurisdictions in the amounts of $14.0 million and $1.9 million, respectively, which is included in continuing operations and (2) $3.1 million which is included in discontinued operations. The change in the valuation allowance for the year ended December 31, 2024 of $5.3 million is included in continuing operations with an additional decrease in valuation allowance of $500 thousand included in discontinued operations. The Company has fully reserved the net deferred tax asset.

 

 

The income tax provision charged to continuing operations for the years ended December 31, 2025 and 2024 was as follows:

 SCHEDULE OF INCOME TAX PROVISION CHARGES

		2025				2024
		December 31,
		2025				2024
Current:
U.S. federal		$	25,918			$	404,000
State and local			19,803				194,000
Foreign			-				-
Total			45,721				598,000
Deferred:
U.S. federal			-				-
State and local			-				-
Foreign			-				-
Total			-				-
Provision for income taxes		$	45,721			$	598,000

 

The provision for income taxes differs from the expected amount of income tax benefit determined by applying the U.S. federal income tax rate of 21% to pretax income (loss) for the years ended December 31, 2025 and 2024 as follows:

 SCHEDULE OF PROVISION DIFFERS FROM THE AMOUNT OF INCOME TAX

		December 31, 2025
		$				Rate
U.S. federal statutory tax rate			(2,139,168	)			21.00	%
State and local income taxes, net of federal income tax effect(a)			2,217				(0.02	)%
Changes in valuation allowances			(14,003,937	)			137.47	%
Nontaxable or nondeductible items			103,557				(1.02	)%
Other adjustments
Share-based compensation			15,993,992				(157.01	)%
Other			89,060				(0.87	)%
Effective tax rate			45,721				(0.45	)%

 

(a)	State taxes in California and Texas comprised greater than 50% of the tax effect in this category.

 

		December 31, 2024
Computed “expected” tax benefit		$	(3,982,000	)
Increase (decrease) in income taxes resulting from:
State taxes			(406,000	)
Permanent differences			37,000
Change in valuation allowance			5,332,000
Deferred true up			(384,000	)
Other			1,000
Provision for income taxes		$	598,000

 

 

The following table presents income taxes paid (net of refunds received) during the year ended December 31, 2025 by jurisdiction:

 

SCHEDULE OF INCOME TAX PAID

-		$	-
U.S. federal taxes		$	304,000
State and local taxes
California			139,000
Texas			84,000
Other states			60,000
Total income taxes paid		$	587,000

 

The tax effect of temporary differences and carryforwards that give rise to significant portions of the deferred tax assets and liabilities as of December 31, 2025 and 2024 are presented below:

 SCHEDULE OF NET DEFERRED TAX LIABILITIES

		2025				2024
		December 31,
		2025				2024
Deferred tax assets:
Stock-based compensation			2,385,000				17,981,000
Sec 174 – software development			-				915,000
Accrued compensation			242,000				976,000
Operating lease liabilities			1,499,000				1,569,000
Business interest limitation			-				1,324,000
Other			1,171,000				924,000
Net operating loss carryforwards			25,244,000				23,634,000
Total Deferred tax assets			30,541,000				47,323,000
Deferred tax liabilities:
Right of use assets			(1,248,000	)			(1,480,000	)
Depreciation			(278,000	)			(181,000	)
Sec 174 – Software development			(2,378,000	)			-
Total deferred tax liabilities			(3,904,000	)			(1,661,000	)
Less valuation allowance			(26,637,000	)			(45,662,000	)
Deferred tax assets, Net		$	-			$	-

 

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted, extending many of the expiring tax provision of the Tax Cuts and Jobs Act (“TCJA”) while adding, modifying and altering numerous provisions. During the year ended December 31, 2025, the Company completed its assessment of the OBBBA and has implemented the changes enacted under the law. The enactment and application of OBBBA did not have a material impact on the Company’s effective tax rate or these consolidated financial statements.