Alzamend Neuro, Inc. Income Taxes Disclosure

6. INCOME TAXES

 

The following is a geographical breakdown of the Company’s loss before the provision for income taxes:

Schedule of Income before income tax, domestic and foreign
		April 30, 2025				April 30, 2024
Pre-tax loss:
Federal		$	(4,514,853	)		$	(9,947,746	)
Total pre-tax loss		$	(4,514,853	)		$	(9,947,746	)

  

Significant components of the Company’s deferred tax assets were as follows:

Schedule of deferred tax assets and liabilities
		April 30, 2025				April 30, 2024
Deferred income tax asset:
Accruals		$	3,705			$	-
Capitalized research expenditures			2,677,922				2,321,972
Net operating loss carryover			10,566,664				10,838,412
Stock-based compensation			2,022,954				2,638,820
Total deferred tax asset			15,271,245				15,799,204
Fixed assets			(23,848	)			(32,400	)
Valuation allowance			(15,247,397	)			(15,766,804	)
Deferred income tax asset, net of allowance		$	-			$	-

 

A reconciliation of the federal statutory income tax rate to the Company’s effective income tax rate for the years ended April 30, 2025 and 2024, is as follows:

Schedule of effective income tax rate reconciliation
		2025				2024
Tax benefit at U.S. Federal statutory tax rate			21.0	%			21.0	%
State income tax, net of federal benefit			-32.0	%			28.9	%
Increase (decrease) in tax rate resulting from:
Change in valuation allowance			11.5	%			-49.8	%
Stock-based compensation			-0.3	%			-0.1	%
Other			-0.2	%			0.0	%
Effective tax rate			0.0	%			0.0	%

 

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that the Company’s deferred tax assets will be realized. Management considers the scheduled reversal of deferred tax assets, projected future taxable income and tax planning strategies in making such assessments. Given historical generation of and expected future taxable losses, management determined it is more likely than not that some or all of the deferred tax assets will not be realized. Therefore, a full valuation allowance was maintained, as of the years ended April 30, 2025 and 2024, of $15,247,397 and $15,766,804, respectively.

 

At April 30, 2025, the Company maintained U.S. Federal and state net operating loss (“NOL”) carryovers of approximately $44.2 million and $22.4 million, respectively. Federal and state NOLs begin to expire in various years depending on relevant jurisdiction. In accordance with Internal Revenue Code §382 (“IRC §382”), the future deductibility of the Company’s NOL’s may be subject to an annual limitation in the event of a change in control as defined by applicable regulations. The Company has yet to complete a formal study to confirm NOL’s are not limited in utilization per IRC §382 and may reduce applicable deferred tax assets upon completion of such a study, in future periods.

 

The impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. The Company had no uncertain tax positions as of April 30, 2025.

 

The Company’s policy is to recognize interest and penalties related to income tax matters in the provision for income taxes. As of April 30, 2025, no interest or penalties have been recorded pertaining to uncertain tax positions.

 

The Company is subject to taxation in the United States and various U.S. state jurisdictions. All tax years remain open to examination by the Internal Revenue Service and relevant state authorities.