INCOME AND OTHER TAXES

12 Months Ended

Dec. 31, 2025

INCOME AND OTHER TAXES

INCOME AND OTHER TAXES

NOTE 12 – INCOME AND OTHER TAXES

On January 1, 2025, the Company adopted ASU 2023-09, Improvements to Income Tax Disclosures, which requires disaggregated information about its effective tax rate reconciliation as well as information on income taxes paid. Because the Company adopted ASU 2023-09 in 2025 using a prospective method, disclosures for historical periods were not revised to conform to this ASU.

There was no income tax expense (benefit) for the years ended December 31, 2025 and 2024.

Domestic and foreign components of loss before income taxes were as follows:

	Years ended December 31,
	2025		2024
Domestic	$	(1,091,499)	$	(1,009,939)
Foreign		(3,248,027)		(720,465)
Loss before income taxes	$	(4,339,526)	$	(1,730,404)

The income tax expense (benefit) for the year ended December 31, 2025 differs from the amount of income tax determined by applying the U.S. federal income tax rate to pre-tax income (loss) due to the following:

	Year ended December 31, 2025
	$		%
U.S. federal statutory tax benefit	$	(911,000)	21.0	%
State tax effects
State income tax, net of federal benefit (1)		(46,000)	1.1	%
Montana worldwide election and apportionment		(99,000)	2.3	%
Foreign tax effects
Mexico
Impact of change in foreign exchange rate		(370,000)	8.5	%
Foreign tax rate difference		(255,000)	5.9	%
Inflation indexation of net operating loss carryforwards		(150,000)	3.5	%
Expiration of net operating loss carryforwards		761,000	(17.5)	%
Adjustment for prior year tax estimate		(76,000)	1.8	%
Release of valuation allowance due to net operating loss expiration		(761,000)	17.5	%
Change in valuation allowance		1,491,000	(34.4)	%
Other		(46,000)	1.1	%
Canada
Change in valuation allowance		110,000	(2.6)	%
Other		(23,000)	0.5	%
Change in valuation allowance		623,000	(14.4)	%
Nontaxable or nondeductible items
Share-based compensation		188,000	(4.4)	%
Excess tax benefits from stock-based compensation		(674,000)	15.6	%
Other adjustments
Adjustment for prior year tax estimate		230,000	(5.3)	%
Other		8,000	(0.2)	%
Total income tax expense	$	—	—	%

⁽¹⁾ State taxes in Montana made up the majority (greater than 50 percent) of the tax effect in this category.

The income tax expense (benefit) for the year ended December 31, 2024 differs from the amount of income tax determined by applying the U.S. federal income tax rate to pre-tax income (loss) due to the following:

	Year ended
	December 31,
	2024
U.S. federal statutory tax provision (benefit)	$	(363,000)
State income tax provision (benefit) net		(30,000)
Foreign taxes		(63,000)
VAT refund reserve and other non-deductible items		257,000
Adjustment for prior year tax estimate to actual-domestic		155,000
Adjustment for prior year tax estimate to actual-foreign		63,000
Share-based compensation		21,000
Impact on change in foreign exchange rate		532,000
Change in valuation allowance - Domestic		57,000
Change in valuation allowance - Foreign		(629,000)
Total income tax expense	$	—

The Company’s net deferred tax assets and liabilities were as follows:

	As of December 31,
	2025		2024
Deferred tax asset:
Domestic net operating loss carry forward	$	1,303,000	$	692,000
Foreign net operating loss carry forward		2,945,000		2,255,000
Share-based compensation		1,045,000		67,000
Other		224,000		93,000
		5,517,000		3,107,000
Valuation allowance (domestic)		(908,000)		(285,000)
Valuation allowance (foreign)		(2,945,000)		(2,255,000)
Total deferred tax asset		1,664,000		567,000
Deferred tax liability:
Property, plant, and equipment		(882,000)		(567,000)
Investment in equity securities		(782,000)		—
Total deferred tax liability		(1,664,000)		(567,000)
Net deferred tax asset after valuation allowance	$	—	$	—

At December 31, 2025 and 2024, the Company had deferred tax assets arising principally from net operating loss carry forwards for income tax purposes. As management cannot determine that it is more likely than not the benefit of the net deferred tax asset will be realized, a valuation allowance equal to 100% of the net deferred tax asset has been recorded at December 31, 2025 and 2024.

Changes in the valuation allowance (foreign) for 2025 were as follows:

	Year ended
	December 31,
	2025
Balance at beginning of period	$	2,255,000
Change in valuation allowance - Mexico		1,491,000
Change in valuation allowance - Canada		110,000
Release of valuation allowance due to NOL expiration		(761,000)
Inflation indexation of net operating loss carryforwards		(150,000)
Balance at end of period	$	2,945,000

At December 31, 2025, the Company has federal net operating loss (“NOL”) carry forwards of approximately $4.2 million, all of which will never expire but is limited to offsetting up to 80% of taxable income in any future year. The Company has Montana state NOL carry forwards of approximately $4.4 million which expire between 2029 and 2035, and Idaho state NOL carry forwards of approximately $3.9 million, which expire between 2034 and 2045. The Company also has approximately $9.4 million of Mexican NOL carry forwards which expire between 2030 and 2035 and $462,000 of Canadian NOL carry forwards which expire between 2044 and 2045. All carryforwards in all jurisdictions are subject to certain limitations.

During the years ended December 31, 2025 and 2024, there were no material uncertain tax positions taken by the Company. The Company’s United States income tax filings are subject to examination for the years 2022 through 2025, for the years 2020 through 2025 in Mexico, and for the years 2024 and 2025 in Canada. However, for tax attributes from prior years, the statute remains open. The Company records penalties on assessments to general and administrative expense and records interest charges to interest expense.

Mexico Tax Assessment

In 2015, the Mexican tax authority (“SAT”) initiated an audit of USAMSA’s 2013 income tax return. In October 2016, as a result of its audit, SAT assessed the Company $13.8 million pesos, which was approximately $666,400 in U.S. Dollars (“USD”) as of December 31, 2016. SAT’s assessment was based on the disallowance of specific costs that the Company deducted on the 2013 USAMSA income tax return. The assessment was settled in 2018 with no assessment due from the Company.

In 2019, the Company was notified that SAT re-opened its assessment of USAMSA’s 2013 income tax return and, in November 2019, SAT assessed the Company $16.3 million pesos, which was approximately $865,000 USD as of December 31, 2019. Management reviewed the 2019 assessment notice from SAT and, similar to the earlier assessment, believed the findings had no merit. An appeal was filed by the Company in November 2019 suspending SAT from taking immediate action regarding the assessment. In August 2020, the Company filed a lawsuit against SAT for resolution of the process and, in December 2020, filed closing arguments. In 2022, the Mexican court ruled against the Company in the above matter, which was subsequently appealed by the Company. In March 2024, Mexico’s appellate court ruled in favor of the Company with no assessment due related to this audit of USAMSA’s 2013 income tax return by SAT and instructed the lower court to issue a new ruling. In May 2024, Mexico’s lower court issued a final ruling on this matter in favor of the Company but left open the possibility for the SAT to re-open their audit. Subsequent to this judgment, the Company requested a final ruling on whether SAT can re-open this matter, on which the appellate court has not ruled.

In January 2026, the Federal Administrative Justice Court (Tribunal Federal de Justicia Administrativa, “TFJA”) issued a final judgment in favor of the Company with respect to the SAT’s reassessment of USAMSA’s 2013 income tax return. The TFJA declared both the underlying tax credit and the related administrative appeal resolution invalid, including prior assessments and associated interest, penalties, and additional employee profit sharing. The ruling addressed the substantive merits of the case and determined that the Company was not subject to the obligations asserted by SAT. As a result of this final judgment, the matter is considered resolved with no amounts due from the Company. This resolution had no impact on the Company’s consolidated financial statements, as no liability had been recorded in connection with this matter.

Mexico Import Value Added Tax

USAMSA recorded a receivable of $1,875,771 and $907,408 at December 31, 2025 and December 31, 2024, respectively, for the Import Value Added Tax (“IVA tax” or “VAT”) it pays on certain goods and services representing amounts to be reimbursed from the Mexican government. USAMSA recorded reserves against its IVA tax receivable balances of $1,875,771 and $575,151 at December 31, 2025 and December 31, 2024, respectively. The net IVA tax receivable of $332,257 at December 31, 2024 is recorded in “Other assets, net” in the Consolidated Balance Sheets.