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

NOTE 10 – INCOME TAXES

 

The components of loss before income taxes are as follows:

 

   2024   2023 
Domestic   (5,526,365)   (4,998,066)
Foreign   1,021    (2,431)
Loss before income taxes   (5,525,344)   (5,000,497)

 

 

The Company had no income tax expense due to operating losses incurred for the years ended December 31, 2024 and 2023.

 

For the years ended December 31, 2024 and 2023, a reconciliation of the Company’s effective tax rate to the statutory U.S. Federal rate is as follows:

 

   2024   2023 
Income taxes at Federal statutory rate   (21.0)%   (21.0)%
State income taxes, net of Federal income tax effect   (8.9)%   (8.9)%
Perm difference   0.0%   0.0%
Foreign tax rate differential   0.0)%   (0.1)%
Change in valuation allowance   29.9%   30.0%
Other   0.0%   0.0%
Income tax provision   0.0%   0.0%

 

The tax effects of temporary differences that give rise to the Company’s deferred tax assets and liabilities are as follows:

 

   2024   2023 
U.S. net operating loss carryforwards   6,305,000    4,940,000 
Stock compensation   2,408,000    2,131,000 
 Deferred tax assets, gross   8,713,000    7,071,000 
Valuation allowance   (8,713,000)   (7,071,000)
Net deferred tax assets   -    - 

 

As of December 31, 2024 the Company had federal net operating loss carryforwards (“NOL”) of approximately $19.7 million. The 2017 Tax Cuts and Jobs Act (“TCJA”) will generally allow losses incurred after 2017 to be carried over indefinitely, but will generally limit the net operating loss deduction to the lesser of the net operating loss carryover or 80% of a corporation’s taxable income (subject to Section 382 of the Internal Revenue Code of 1986, as amended). Also, there will be no carryback for losses incurred after 2017. Losses incurred prior to 2018 will generally be deductible to the extent of the lesser of a corporation’s net operating loss carryover or 100% of a corporation’s taxable income and be available for twenty years from the period the loss was generated. The federal net operating losses generated prior to 2018 of $0.1 million will expire at various dates through 2037. As of December 31, 2024 and 2023, the Company had state and local net operating loss carryforwards of approximately $18.5 million and $14.0 million, respectively, to reduce future state tax liabilities also through 2035.

 

As of December 31, 2024 and 2023, the Company had Canadian NOL of approximately $1.4 million and $1.4 million respectively. The Canadian losses expire in stages beginning in 2026. As of December 31, 2024 and 2023, the Company also has unclaimed Canadian federal scientific research and development investment tax credits, which are available to reduce future federal taxes payable of approximately $0 and $0 respectively.

 

As a result of losses and uncertainty of future profit, the net deferred tax asset has been fully reserved. The net change in the valuation allowance during the years ended December 31, 2024 and 2023 was an increase of $0.5 million and $1.5 million, respectively.

 

Foreign earnings are assumed to be permanently reinvested. U.S. Federal income taxes have not been provided on undistributed earnings of our foreign subsidiary.

 

The Company recognizes interest and penalties related to uncertain tax positions in selling, general and administrative expenses. The Company has not identified any uncertain tax positions requiring a reserve as of December 31, 2024 and 2023.

 

The Company is required to file U.S. federal and state income tax returns. These returns are subject to audit by tax authorities beginning with the year ended December 31, 2018.