Newton Golf Company, Inc. Income Taxes Disclosure

NOTE 13 – INCOME TAXES

 

The Company uses an asset and liability approach for accounting and reporting for income taxes that allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense.

 

At December 31, 2025, the Company had available Federal and various state net operating loss carryforwards to reduce future taxable income of $17,509,000 and $4,640,000, respectively. The Federal net operating losses carry forward indefinitely and the various state net operating losses expire in various amounts through 2045. Given the Company’s history of net operating losses, management has determined that it is more likely than not that the Company will not be able to realize the tax benefit of the carryforwards. Accordingly, the Company has not recognized a deferred tax asset for this benefit. Due to restrictions imposed by Internal Revenue Code Section 382 regarding substantial changes in ownership of companies with loss carryforwards, the utilization of the Company’s NOLs may be limited as a result of changes in stock ownership. NOLs incurred subsequent to the latest change in control are not subject to the limitation.

  

The Company has adopted FASB guidelines that address the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under this guidance, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. This guidance also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. As of December 31, 2025 and 2024, the Company did not have a liability for unrecognized tax benefits, and no adjustment was required at adoption.

 

The Company’s policy is to record interest and penalties on uncertain tax provisions as income tax expense. As of December 31, 2025, and 2024, the Company has not accrued interest or penalties related to uncertain tax positions. Additionally, tax years 2022 through 2025 remain open to examination by the major taxing jurisdictions to which the Company is subject.

 

Upon the attainment of taxable income by the Company, management will assess the likelihood of realizing the tax benefit associated with the use of the carryforwards and will recognize the appropriate deferred tax asset at that time.

 

The Company’s effective income tax rate differs from the amount computed by applying the federal statutory income tax rate to loss before income taxes as follows:

SCHEDULE OF EFFECTIVE TAX RATE 

		December 31, 2025				December 31, 2024
Income tax benefit at federal statutory rate			(21.0	)%			(21.0	)%
State income tax benefit, net of federal benefit			(7.0	)%			(6.0	)%
Nondeductible finance costs			-				13	%
Change in valuation allowance			28.00	%			14.00	%
Income taxes at effective tax rate			-	%			-	%

 

The components of deferred taxes consist of the following at December 31, 2025 and 2024:

SCHEDULE OF DEFERRED TAX 

		December 31, 2025				December 31, 2024
Net operating loss carryforwards		$	3,987,000			$	2,686,000
Less: Valuation allowance			(3,987,000	)			(2,686,000	)
Net deferred tax assets		$	-			$	-