Amesite Inc. Income Taxes Disclosure

Note 7 - Income Taxes

 

The Company accounts for income taxes under ASC 740-10, which provides for an asset and liability approach of accounting for income taxes. Under this approach, deferred tax assets and liabilities are recognized based on anticipated future tax consequences, using currently enacted tax laws, attributed to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts calculated for income tax purposes. The provision (benefit) for income taxes for the fiscal years ended June 30, 2025 and 2024 assumes a 21% effective tax rate for federal income taxes and a 6% effective tax rate for state income tax purposes.

 

For the year ended June 30, 2025 and prior periods since inception, the Company’s activities have not generated taxable income. A valuation allowance has been recorded on tax loss carryforwards and other deferred tax assets. Accordingly, the Company has not recognized any current or deferred income tax expense or benefit for the years ended June 30, 2025 and 2024.

 

A reconciliation of the provision for income taxes to income taxes computed by applying the statutory United States federal rate to income before taxes is as follows:

 

		For the Years Ended June 30,
		2025				2024
Income tax, at applicable federal tax rate		$	(760,000	)		$	(925,000	)
State income tax			(217,000	)			(264,000	)
Temporary differences			(500,000	)			(141,000	)
Permanent differences			-				-
Change in valuation allowance			1,477,000				1,330,000
		$	-			$	-

 

Significant components of the Company’s deferred tax assets as of June 30, 2025 and 2024 are summarized below.

 

		2025				2024
Federal tax statutory rate			21.0	%			21.0	%
State tax statutory rate			6.0	%			6.0	%
Temporary differences			13.8	%			3.2	%
Valuation allowance			-40.8	%			-30.2	%
Effective rate			0.0	%			0.0	%

 

The Company has approximately $27.5 million of net operating loss carryforwards for federal and state, available to reduce future income taxes at June 30, 2025. Approximately $17,000 of the federal net operating losses will expire in 2037 and the balance can be utilized indefinitely.

 

The Company provides for a valuation allowance when it is more likely than not that it will not realize a portion of the deferred tax assets. Due to uncertainty as to the realization of the net operating loss carryforwards and other deferred tax assets, as a result of the Company’s limited operating history and operating losses since inception, a full valuation allowance has been recorded against the Company’s deferred tax assets. The Company does not have any uncertain tax positions. The net operating loss carryforwards may be subject to an annual limitation as a result of a change of ownership as defined under Internal Revenue Code Section 382. The state net operating losses will begin to expire in 2027. Tax years 2020-2024 remain open to examination for federal income tax purposes and by other major taxing jurisdictions to which the Company is subject. Our net deferred tax asset and valuation allowance increased by $1,336,000 and $1,074,000 during the fiscal years ended June 30, 2025 and 2024, respectively.

 

To the extent that the tax deduction is included in a net operating loss carry forward and is in excess of amounts recognized for book purposes, no benefit will be recognized until the loss carry forward is recognized. Upon utilization and realization of the carry forward, the corresponding change in the deferred asset and valuation allowance will be recorded as additional paid-in capital.