NOTE 12 - INCOME TAXES

The following table presents the components of net loss before income taxes:

There was no income tax for the years ended December 31, 2024 and December 31, 2023. The Company’s tax expense differs from the “statutory” tax expense for the years ended December 31, 2024, and 2023 as noted below:

Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating losses and tax credit carryforwards. The tax effects of significant items comprising the Company’s deferred taxes were as follows: 

ASC 740 Income Taxes requires that the tax benefit of net operating losses (“NOLs”), temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. Management believes that realization of the deferred tax assets arising from the above-mentioned future tax benefits from operating loss carryforwards is currently not more likely than not and, accordingly, has provided a valuation allowance. The valuation allowance increased by $1.4 million for the year ended December 31, 2024 and increased by $1.6 million for the year ended December 31, 2023. 

As of December 31, 2024 and 2023 the Company’s deferred tax asset contains the tax effect of approximately $48.3 million and $41.4 million of Federal NOLs, respectively. The Federal NOLs generated prior to December 31, 2017 were written off of the deferred tax asset, in 2022, while NOLs generated subsequent to this date remain. Under the Tax Cuts and Jobs Act, all Federal NOLs incurred after December 31, 2017 are carried forward indefinitely for Federal tax purposes. 

As of December 31, 2024, the Company has no uncertain tax positions. It is the Company’s policy to account for interest and penalties related to uncertain tax positions as interest expense and general and administrative expense, respectively in its statements of operations. No interest or penalties have been recorded related to the uncertain tax positions.

It is not expected that there will be a significant change in uncertain tax positions in the next 12 months. The Company is subject to U.S. federal and state income tax as well as to income tax in multiple state jurisdictions. In the normal course of business, the Company is subject to examination by tax authorities. As of the date of the financial statements, there are no tax examinations in progress. The statute of limitations for tax years ended after December 31, 2020, are open for federal and state tax purposes.

 In the ordinary course of its business the Company incurs costs that, for tax purposes, may be qualified research expenditures within the meaning of IRC Code Sec. 41 and, therefore, may be eligible for the Increasing Research Activities credit under IRC Code Sec. 41. The Company has not claimed a credit pursuant to IRC Code Sec. 41 on its federal returns, i.e. no deferred tax asset is recorded on the books.

The 2017 Tax Act amended Section 174 of the Internal Revenue Code which affects the Federal tax treatment of research and experimental (R&E) expenditures. Preceding this law change, R&E expenditures were expensed as incurred for Federal Income Tax purposes. In taxable years beginning after December 31, 2021, R&E expenditures must be capitalized and amortized over 5 years for expenditures incurred in the United States, or 15 years for expenditures incurred outside the United States. Due to the nature of the Company’s operations, R&E expenditures are a significant portion of total expenditures. The Company calculated an estimated amount for income tax provision purposes based on guidance available to determine the capitalized amount.