11. INCOME TAXES

Upon adoption of ASU 2023-09, Improvements to Income Tax Disclosures, as described in Note 2, Summary of Significant Accounting Policies, our loss before provision for income taxes from continuing operations for the years ended December 31, 2025 and 2024 was as follows:

Loss Before Provision for Income Taxes – Continuing Operations

SUMMARY OF LOSS BEFORE TAXES

Upon adoption of ASU 2023-09, Improvements to Income Tax Disclosures, as described in Note 2, Summary of Significant Accounting Policies, the reconciliation of income tax expense (credit) at the U.S. federal statutory rate to the Company’s provision for income taxes is as follows:

SCHEDULE OF RECONCILIATION OF INCOME TAX EXPENSE STATUTORY RATE

The tax effect of the reconciling items does not meet the quantitative 5% threshold to require further disaggregation.

Deferred Income Taxes

The Company has operations in the US and the UK, with discontinued operations in Germany, and has incurred net operating losses since inception. The Company has not reflected any tax benefit related to such net operating losses in the financial statements. Prior to August 15, 2007 the Company’s US operating entity was a limited liability company and losses were passed through to the individual members, therefore the Company only has potential tax benefits from the date it became a ‘C’ corporation.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Upon adoption of ASU 2023-09, Improvements to Income Tax Disclosures, as described in Note 2, Summary of Significant Accounting Policies, significant components of the Company and its subsidiaries’ deferred tax assets at December 31, 2025 and December 31, 2024 are as follows:

SCHEDULE OF DEFERRED TAX ASSETS

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income.

The authoritative guidance requires a valuation allowance to reduce the deferred tax assets recorded if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Furthermore, in circumstances in which management has determined that existing conditions or events raise substantial doubt about its ability to continue as a going concern the authoritative guidance requires that a valuation allowance should be recorded for all deferred tax assets. Accordingly, management has determined that a 100% valuation allowance is appropriate at December 31, 2025 and December 31, 2024.

The U.S. Tax Cuts and Jobs Act (Tax Act) was enacted on December 22, 2017 and introduced significant changes to U.S. income tax law. Effective in 2018, the Tax Act reduced the U.S. statutory tax rate from 35% to 21% and created new taxes on certain foreign-sourced earnings and certain related-party payments, which are referred to as the global intangible low-taxed income tax and the base erosion tax, respectively. The Tax Act requires us to pay U.S. income taxes on accumulated foreign subsidiary earnings not previously subject to U.S. income tax at a rate of 15.5% to the extent of foreign cash and certain other net current assets and 8% on the remaining earnings. Since the Company’s foreign subsidiaries (continuing and discontinued) have not generated taxable income and have no accumulated earnings, the Company believes that the Tax Act will not have a significant impact on the Company’s consolidated financial statements.

Net Operating Loss Carry-Forwards

As of December 31, 2025 and 2024, the Company had U.S. accumulated losses for tax purposes of approximately $19,880,000 and $19,900,000 respectively, which may be carried forward and offset against U.S. taxable income, and expire during the tax years 2029 through 2043.

Federal tax laws impose significant restrictions on the utilization of net operating loss carry-forwards and in the event of a change in ownership of the Company, as defined by the Internal Revenue Code Section 382. The Company’s net operating loss carry-forwards may be subject to the above limitations.

As of December 31, 2025 and 2024, the Company had UK accumulated losses for tax purposes of approximately $305,000 and $259,000 respectively, which may be carried forward and offset against UK taxable income subject to certain restrictions and limitations.

As of December 31, 2025 and 2024, the Company had German accumulated losses for tax purposes of approximately $1,485,000 and $1,310,000 respectively in its discontinued operations, which may be carried forward and offset against German taxable income subject to certain restrictions and limitations in the event of changes in the NovaVision GmbH’s ownership. As disclosed in Note 3, the Company is in the process of winding down the entity, following which these tax losses will no longer be available.

Tax Rates

The applicable US income tax rate for the Company for both of the years ended December 31, 2025 and 2024 was 21%. Non-US subsidiaries are taxed according to the tax laws in their respective country of residence. The UK applicable rate for smaller companies for both the years ended December 31, 2025 and 2024 was 19%; the German applicable rate for both of the years ended December 31, 2025 and 2024 was 31.58%.

If any earnings were distributed to US in the form of dividends or otherwise, after the repayment of intercompany debt, the Company would be subject to additional US income taxes (subject to an adjustment for foreign tax credits) and foreign withholding taxes.

Uncertain Tax Position

The Company files tax returns in the U.S. and various states, as well as in the UK and Germany. Tax years within the periods 2021 to 2025 are open for audit in the US by the IRS or states. Any net operating losses and tax credits generated within these years are subject to adjustment for U.S. federal and state income tax purposes. Tax returns have yet to be filed in the UK for 2025 and in Germany for 2024 and 2025. The 2010 tax assessment for Germany remains open (see Note 12) but the assessments for 2011 to 2023 have been accepted.

The Company has recorded no liability for income taxes associated with unrecognized tax benefits at the date of adoption and has not recorded any liability associated with unrecognized tax benefits during 2025 and 2024. Accordingly, the Company has not recorded any interest or penalty in regard to any unrecognized benefit.