(13) Income Taxes

Loss before income taxes for the years ended April 30, 2025 and 2024 consisted of the following components:

 Schedule of Components of Loss Before Income Taxes

The income tax benefit for the years ended April 30, 2025 and 2024 consisted of $1.0 million and $1.3 million, respectively, from the sale of New Jersey net operating losses and research and development credits.

Tax Rate Reconciliation

The effective income tax rate differed from the percentages computed by applying the U.S. federal income tax rate for the periods ended April 30, 2025 and 2024 to loss before income taxes as a result of the following:

 Schedule of Effective Income Tax Rate Reconciliation

Significant Components of Deferred Taxes

The tax effects of temporary differences and carry forwards that give rise to the Company’s deferred tax assets and deferred tax liabilities are presented below. 

 Schedule of Deferred Tax Assets and Liabilities 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences and carry forwards become deductible or are utilized. As of April 30, 2025 and 2024, based upon the level of historical taxable losses, valuation allowances of $62.2 million and $60.3 million, respectively, were recorded to fully offset deferred tax assets. The valuation allowance increased $1.9 million during the year ended April 30, 2025 and increased $5.7 million during the year ended 2024 respectively, due to continuing net operating losses.

As of April 30, 2025, the Company had net operating loss carry forwards for federal income tax purposes of approximately $250.0 million, which begin to expire in fiscal 2026; $116.2 million of the federal carryforward has no expiration, but the deductibility of such federal net operating losses may be limited to 80% of our taxable income in future years. The Company also had federal research and development tax credit carry forwards of approximately $5.2 million as of April 30, 2025, which begins to expire in 2026. The Tax Reform Act of 1986 contains provisions that limit the utilization of net operating loss and tax credit carry forwards if there has been an ownership change, as defined. The Company has determined that as a result of multiple ownership changes, as described in Section 382 of the Internal Revenue Code, its ability to utilize these NOL’s and research and development tax credit have been significantly limited.

In addition, as of April 30, 2025, the Company had state net operating loss carry forwards of approximately $28.3 million which begin to expire in 2042, which also may be limited to utilization limitations. Further, as of April 30, 2025, the Company dissolved their UK subsidiary, Ocean Power Technologies Ltd., and thus have written off their outstanding net operating losses. The ability to utilize these carry forwards may also be limited due to ownership changes.

Income Tax Benefit

The Company has sold New Jersey State net operating losses and research development credits under the New Jersey Economic Development Authority Tax Transfer programs, which has resulted in $1.0 million and $1.3 million of tax benefit related to the fiscal year ended April 30, 2025 and 2024, respectively, from the sale of New Jersey net operating losses and research and development credits. New Jersey-based technology or biotechnology companies with fewer than 225 US employees may be eligible to sell net operating losses and research and development tax credits to unaffiliated corporations, up to a maximum lifetime benefit of $20.0 million per business.

Uncertain Tax Positions

The Company applies the guidance issued by the FASB for the accounting and reporting of uncertain tax positions. The guidance requires the Company to recognize in its consolidated financial statements the impact of a tax position if that position is more likely than not to be sustained upon examination, based on the technical merits of the position. At April 30, 2025 and 2024, the Company had no other unrecognized tax positions. The Company does not expect any material increase or decrease in its income tax expense in the next fiscal year, related to examinations or uncertain tax positions. Net operating loss and credit carry forwards since inception remain open to examination by taxing authorities and will continue to remain open for a period after utilization.

The Company does not have any interest or penalties accrued related to uncertain tax positions as it does not have any unrecognized tax benefits.