BullFrog AI Holdings, Inc. Income Taxes Disclosure

9. Income Taxes

 

Deferred income taxes reflect the net tax effects of net operating losses, credit carryforwards, and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets for federal and state income taxes are as follows:

 Schedule of Deferred Tax Assets And Liabilities

		2025				2024
		December 31,
		2025				2024
Deferred tax assets:
Net operating losses		$	4,284,802			$	2,650,540
Capitalized research and development			633,047				647,602
Stock-based compensation			378,247				183,856
Intangibles			173,817				162,701
Other			14,004				12,374
Total deferred tax assets			5,483,917				3,657,073
Valuation allowance			(5,483,613	)			(3,656,627	)
Net deferred tax asset			304				446
Deferred tax liabilities:
Property and equipment			(304	)			(446	)
Total deferred tax liabilities			(304	)			(446	)
Net deferred tax asset / (liability)		$	-			$	-

 

Realization of the Company’s deferred tax assets is dependent upon future earnings, if any, the timing, and amount of which are uncertain. Because of the Company’s lack of U.S. earnings history, the net U.S. deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by $1,826,986 and $1,583,168 during the years ended December 31, 2025 and 2024, respectively.

 

As of December 31, 2025, the Company has available for federal income tax purposes a gross net operating loss carryforward of approximately $16.9 million and a gross state net operating loss carryforward of approximately $8.5 million. The federal net operating loss carryforward does not expire and may be used to offset future taxable income. The state gross net operating loss begins to expire in 2043. Utilization of some of the federal and state net operating loss carryforwards is subject to annual limitations due to the “change in ownership” provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitations may result in the expiration of net operating losses and credits before utilization.

 

The Company has provided a valuation allowance against the full amount of the net operating loss benefit and its other net deferred tax assets since, in the opinion of management, based upon the earnings history of the Company, it is more likely than not that the future tax benefits of the Company’s net deferred tax assets will not be realized. All or a portion of the remaining valuation allowance may be reduced in future years based on an assessment of earnings sufficient to fully utilize these potential tax benefits.

 

As required under ASU 2023-09, the Company has included only the portion of the valuation allowance related to federal deferred tax assets in the “change in valuation allowance” line of the rate reconciliation. The following table presents a reconciliation of the total change in the valuation allowance:

 Schedule of Change in the Valuation Allowance

		December 31,				December 31,
		2025				2024
Beginning balance		$	3,656,627			$	2,073,459
Change charged to income tax expense			1,826,986				1,583,168
Ending balance		$	5,483,613			$	3,656,627

 

The Company has incurred net operating losses since inception and it did not have unrecognized tax benefits as of December 31, 2025 and 2024, and does not anticipate this to change significantly over the next 12 months. The Company will recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.

 

The Company files income tax returns in the U.S. and certain state jurisdictions. The Company is not currently under examination in these jurisdictions for any tax year. The Company’s tax years beginning with 2022 are open tax years. Because of net operating losses and research credit carryovers, substantially all the Company’s tax years remain open to examination.

 

 

Income tax provision (benefit) related to continuing operations differs from the amounts computed by applying the statutory income tax rate of 21% to pretax loss as follows:

 

Effective Income Tax Rate of Income Tax Expense

		Amount				Rate				Amount				Rate
		December 31, 2025								December 31, 2024
		Amount				Rate				Amount				Rate
U.S. Federal statutory tax rate		$	(1,364,594	)			21.0	%		$	(1,468,666	)			21.0	%
Change in valuation allowance			1,301,116				(20.0	)			1,279,813				(18.3	)
Stock-based compensation			61,674				(1.0	)			193,265				(2.8	)
Other			1,804				-				(4,412	)			0.1
Income tax expense benefit		$	-				-	%		$	-				-	%