INVO Fertility, Inc. Income Taxes Disclosure

Note 17 – Income Taxes

 

The provision for income taxes consists of the following for the years ended December 31, 2025, and 2024:

 Schedule of Provision for Income Taxes

		2025				2024
		December 31
		2025				2024
Federal income taxes:
Current		$	445,808			$	-
Deferred			(163,115	)			131,747
Total federal income taxes			282,693				131,747
State income taxes:
Current			164,498				(22,913	)
Deferred			-				31,368
Total state income taxes			164,498				8,455
Discontinued operations:
Current Federal			(445,808	)			-
Current State			(151,754	)			-
Total discontinued operations			(597,562	)			-
Total income taxes		$	(150,371	)		$	140,202

 

The effective income tax rate is lower than the U.S. federal and state statutory rates primarily because of the valuation allowance and permanent items. In 2025, the permanent expense is related primarily to the impairment in the investment for NTI. A reconciliation of the 2025 and 2024 federal statutory rate as compared to the effective income tax rate is as follows:

 Schedule of Effective Income Tax Rate Reconciliation

		December 31
		2025								2024
Pre-Tax Book Income at Statutory Rate		$	(5,251,208	)			21.00	%		$	(1,769,693	)			21.00	%
State Tax Expense (Benefit), net			10,067				-0.04	%			8,112				-0.10	%
Permanent Items			3,879,792				-15.52	%			207				0.00	%
True-Ups			116,157				-0.46	%			95,878				-1.14	%
Change in Federal Valuation Allowance			1,094,821				-4.38	%			(970,066	)			11.51	%
True up of Basis in Intangible			-				-	%			2,775,764				-32.94	%
Total Expense (Benefit)		$	(150,371	)			0.60	%		$	140,202				-1.66	%

 

Deferred income taxes reflect the net effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax. Significant components of the deferred tax assets and liabilities as of December 31, 2025 and 2024, are as follows:

 Schedule of Deferred Tax Assets and Liabilities

		2025				2024
		December 31
		2025				2024
Deferred tax assets:
Deferred Compensation		$	-			$	105,500
Stock Comp Expense - NQSO			215,317				226,819
Charitable Contribution			-				2,628
Goodwill and Intangibles			347,114				-
Right of Use Liability			571,460				638,395
Restricted Stock Unit			76,805				60,408
Investment in HRCFG			162,851				127,365
Investment in Bloom Partnership			109,388				127,780
Investment in NAYA Therapeutics			648,427				-
IRC Sec. 174 Capitalization			-				103,191
Federal NOL Carryforwards			9,129,631				10,023,354
State NOL DTA, net of Fed Ben			1,599,258				1,597,307
Deferred Revenue			189,758				158,334
Gross deferred tax assets			12,401,582				13,171,081
Deferred tax liabilities:
Fixed Assets			(35,751	)			(38,163	)
Goodwill and Intangibles			-				(3,826,456	)
Investment in NAYA Therapeutics			(648,427	)			-
Unrealized Gain/Loss on Fair Value			(546,625	)			-
Right of Use Asset			(530,379	)			(600,308	)
Gross deferred tax liability			(1,761,182	)			(4,464,927	)
Less: valuation allowance			(10,640,400	)			(8,869,269	)
Net deferred tax liability		$	-			$	(163,115	)

 

 

The Company recorded a valuation allowance against its net deferred tax asset at December 31, 2025 and 2024 totaling $10.6 million and $8.9 million, respectively. For 2024, the Company was in a net position DTL of $0.2M, due primarily to indefinite lived intangibles acquired from NTI for In-Process-R&D. In 2025, as part of the NTI divestiture, the IIR&D was sold and, therefore, no DTL is recorded at December 31, 2025 and a full valuation allowance has been applied to the net DTA.

 

As of December 31, 2025, the Company has federal net operating loss carryforwards of approximately $43.5 million. Of that amount, $9.0 million will expire, if not utilized, in various years beginning in 2029 and which are also subject to the limitations of IRC §382. The remaining carryforward amount of $34.5 million has no expiration period and can be applied to 80% of taxable income per year in future periods.

 

The Company evaluates all tax positions under the guidance of ASC 740 (Income Taxes), which prescribes a recognition threshold and measurement criteria for uncertain tax positions (“UTP”). As of December 31, 2025 and 2024, the Company has not identified any UTPs that meet the more likely than not threshold for recognition. Accordingly, the Company has not recorded a UTP and no liability for a UTP is reflected in the consolidated financial statements for any periods presented. The Company also has not recorded any interest or penalties related to UTP, as none were required to be accrued during the periods ended December 31, 2025 or 2024. The Company’s federal and state income tax returns for the years 2022 – 2025 remain open for examination. There are no current taxing authority examinations underway, and we are not aware of any pending or future examinations. Additionally, no cash tax payments have been made or have been required to be made to the U.S. Internal Revenue Service.

 

On July 4, 2025, the One Big Beautiful Bill Act (“OBBA”) was enacted into law. The OBBA contains several key tax law changes, including extensions and modifications of the Tax Cuts and Jobs Act. In accordance with ASC 740, Income Taxes, the Company is required to recognize the effect of the tax law changes in the period of enactment. The Company will elect under the OBBBA to deduct IRC § 174 (Research & Experimental) costs in the period those occur starting in 2025. Additionally, the Company will elect under IRC § 174A to deduct 100% of the 2022 – 2024 IRC § 174 R&E capitalized costs in 2025. Both elections are considered automatic changes in a tax accounting method under the OBBA. The Company anticipates making the elections to change its tax method of accounting for both items as part of its 2025 tax return filings, due October 15, 2026, and have included the expected impacts from these elections as part of the December 31, 2025 is in the process of assessing the impacts from the tax law changes in the OBBA but does not expect a material impact to the Company’s Consolidated Financial Statements.