NOTE 8 – INCOME TAXES

A reconciliation of the differences between the effective income tax rates and the statutory federal tax rates for the years ended December 31, 2023 and 2022 (computed by applying the U.S. Federal corporate tax rate of 21 percent to the loss before taxes) is as follows:

SCHEDULE OF EFFECTIVE INCOME TAX RATES RECONCILIATION

The tax effect of temporary differences that give rise to significant portions of the deferred tax assets and liabilities for the years ended December 31, 2023 and 2022 consisted of the following:

SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES

At December 31, 2023 and 2022, the Company had net deferred tax assets of $4,186,828 and $3,456,457 principally arising from net operating loss carry-forwards for income tax purposes (“NOLs”). As management of the Company cannot determine that it is more likely than not that the Company will realize the benefit of the net deferred tax asset, a valuation allowance equal to the net deferred tax asset has been established at December 31, 2023 and 2022. At December 31, 2023, the Company has net operating loss carry forwards totaling approximately $17,171,010. The potential tax benefit arising from NOLs generated of approximately $6,822,000 prior to 2018 effective date will begin to expire in 2034. The potential tax benefit arising from the net operating loss carryforwards of approximately $10,349,142 generated after 2018 can be carried forward indefinitely within the annual usage limitations. The Company is in compliance with filling its federal tax returns through December 31, 2022.

The Company’s U.S. federal and state income tax returns are generally subject to tax examinations for the tax years ended December 31, 2020 through December 31, 2022. There are currently no pending income tax examinations. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service and state tax authorities to the extent utilized in a future period. The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision.

The Company’s NOL and tax credit carryovers may be significantly limited under the Internal Revenue Code (“IRC”). NOL and tax credit carryovers are limited under Section 382 when there is a significant “ownership change” as defined in the IRC. During the year ended December 31, 2023 and in prior years, the Company may have experienced such ownership changes, which could impose such limitations.

The limitations imposed by the IRC would place an annual limitation on the amount of NOL and tax credit carryovers that can be utilized. When the Company completes the necessary studies, the amount of NOL carryovers available may be reduced significantly. However, since the valuation allowance fully reserves for all available carryovers, the effect of the reduction would be offset by a reduction in the valuation allowance.