NOTE 14 – Income Taxes

The income tax provision (benefit) is based on the following loss before income taxes, which are from domestic and foreign sources:

The federal, state and foreign income tax provisions are summarized as follows:

A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for continuing operations is as follows:

The tax effects of temporary differences that give rise to significant components of our deferred tax assets consist of:

As of March 31, 2024, we have net operating loss carryforwards for Federal, State and foreign income tax purposes of approximately $116,600,000, $43,200,000 and $1,800,000 respectively. Due to the Tax Cuts and Job Act, Federal NOL generated after March 31, 2018 have an indefinite life. Federal NOL generated on and before March 31, 2017 will begin to expire 2024, if not utilized. State NOLs will begin to expire in the year 2026, if not utilized. Foreign NOLs will carry forward for 10 years.

As of March 31, 2024, we had Federal and California research and development credit carryforward of approximately $1,006,000 and $790,000 respectively. The Federal research and development credits will begin to expire in 2024 while the California research and development credits have no expiration date.

Section 382 of the Internal Revenue Code limits the use of the Federal net operating losses in certain situations where changes occur in stock ownership of a company. If the Company should have an ownership change of more than 50% of the value of the Company's capital stock, utilization of the carryforwards could be restricted. The Company is not aware of any changes in ownership that would result in a change in control under Internal Revenue Code section 382.

The Company released the valuation allowance recorded against its Netherlands deferred tax assets as of March 31, 2024. Given its recent history of earnings, current earnings and anticipated future earnings, the Company concluded that there is sufficient positive evidence available to reach a conclusion that the valuation allowance is no longer needed in the Netherlands. The release of the valuation allowance resulted in the recognition of deferred tax assets of $114,000. The Company, after considering all available evidence, fully reserved against all deferred tax assets in the U.S. since it is more likely than not such benefits will not be realized in future periods. The Company will continue to evaluate its deferred tax assets to determine whether any changes in circumstances could affect the realization of their future benefit.

The Company has filed tax returns for federal, state and foreign jurisdictions. The Company’s evaluation of uncertain tax matters was performed for tax years ended through March 31, 2024. Generally, the Company is subject to audit for the years ended March 31, 2023, 2022 and 2021. The Company has elected to retain its existing accounting policy with respect to the treatment of interest and penalties attributable to income taxes, and continues to reflect interest and penalties attributable to income taxes, to the extent they arise, as a component of its income tax provision or benefit as well as its outstanding income tax assets and liabilities. The Company believes that its income tax positions and deductions would be sustained on audit and does not anticipate any adjustments result in a material change to its financial position.