GridAI Technologies Corp. Income Taxes Disclosure
Note 18 - Income Taxes
The Company is subject to taxation at the federal and state levels in the United States. At December 31, 2025 and 2024, the Company had no tax provision.
At December 31, 2025 and 2024, the Company had gross deferred tax assets of approximately $39.1 million and $39.6 million, respectively. A full valuation allowance of approximately $38.2 million and $37.6 million was recorded as of December 31, 2025 and 2024, respectively, as the Company has determined that it is more likely than not that the deferred tax assets will not be realized. The change in the valuation allowance was approximately $0.6 million and $4.2 million for the years ended December 31, 2025 and 2024, respectively. The significant components of the Company’s net deferred tax assets and liabilities consisted of:
| December 31, | |||||
| 2025 | | 2024 | |||
Gross deferred tax assets: |
| |
| | ||
Net operating loss carry-forwards | $ | 30,538,000 | $ | 29,616,000 | ||
Stock compensation |
| 239,000 |
| 280,000 | ||
Intangible assets |
| 4,617,000 |
| 5,013,000 | ||
Capitalized research and development |
| 1,316,000 |
| 2,299,000 | ||
Research and development credits |
| 2,389,000 |
| 2,239,000 | ||
Other |
| 35,000 |
| 105,000 | ||
Deferred tax assets before valuation allowance | $ | 39,134,000 | $ | 39,552,000 | ||
Valuation allowance |
| (38,234,000) |
| (37,649,000) | ||
Deferred tax assets net of valuation allowance | $ | 900,000 | $ | 1,903,000 | ||
Gross deferred tax liabilities: |
|
|
|
| ||
Right of use asset |
| — |
| (32,000) | ||
Indefinite lived intangibles | (5,459,000) | (15,744,000) | ||||
Total deferred tax liability | $ | (4,559,000) | $ | (15,776,000) | ||
Total deferred tax liability, net | $ | (4,559,000) | $ | (13,873,000) | ||
Income taxes computed using the federal statutory income tax rate differs from the Company’s effective tax rate primarily due to the following:
| December 31, |
| |||
| 2025 | | 2024 |
| |
Income tax benefit at statutory rate |
| 21.0 | % | 21.0 | % |
State income tax |
| — | 5.8 | ||
Non-deductible expense |
| — | (0.3) | ||
Change in valuation allowance |
| (18.2) | (23.6) | ||
Prior year adjustments |
| — | — | ||
Non-deductible transaction costs |
| — | (5.6) | ||
Other |
| 3.2 | 2.7 | ||
Total income tax benefit |
| 6.1 | % | 0.0 | % |
At December 31, 2025 and 2024, the Company had gross deferred tax assets of approximately $33.7 million and $23.7 million, respectively. As the Company cannot determine that it is more likely than not that the Company will realize the benefit of the deferred tax asset, a valuation allowance of approximately $38.2 million and $37.6 million has been established at December 31, 2025 and 2024, respectively. The change in the valuation allowance was approximately $.6 million and $4.2 million in 2025 and 2024, respectively.
At December 31, 2025, the Company had approximately $119.990 million of gross federal NOLs which will begin to expire in fiscal year 2033 if unused. The Company’s ability to use its NOL carryforwards may be limited if it experiences an “ownership change” as defined in Section 382 of the Internal Revenue Code of 1986, as amended. An ownership change generally occurs if certain stockholders increase their aggregate percentage ownership of a corporation’s stock by more than 50 percentage points over their lowest percentage ownership at any time during the testing period, which is generally the three-year period preceding any potential ownership change. The Company has not completed a study to determine whether transactions that have occurred over the past three years may have triggered an ownership change limitation. To the extent a limitation occurred, it would not have a material impact on the Company’s financial statements as the related deferred tax assets are fully offset by a valuation allowance as of the current period. The Company had taken no uncertain tax positions that would require disclosure under ASC 740, Accounting for Income Taxes, at December 31, 2025 and 2024, respectively. The Company’s main state tax jurisdictions are Florida and Massachusetts.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | May 1, 2026 | Showing above |
| 2024 | Apr 1, 2025 | |
| 2023 | Mar 29, 2024 | |
| 2022 | Mar 20, 2023 | |
| 2021 | Mar 31, 2022 | |
| 2020 | Mar 31, 2021 | |
| 2019 | Mar 30, 2020 | |
| 2018 | Apr 1, 2019 | |
| 2017 | Mar 16, 2018 | |
| 2016 | Mar 31, 2017 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.