Sanara MedTech Inc. Income Taxes Disclosure

NOTE 12 – INCOME TAXES

 

The Company accounts for income taxes in accordance with ASC Topic No. 740, Income Taxes. This standard requires the Company to provide a net deferred tax asset or liability equal to the expected future tax benefit or expense of temporary reporting differences between book and tax accounting and any available operating loss or tax credit carry forwards.

 

After applying the provisions of Section 382 of the Internal Revenue Code, the unexpired net operating loss (“NOL”) carryforward at December 31, 2024 was approximately $57.5 million, of which, approximately $26.5 million, generated in 2017 and prior, will expire between 2024 and 2037. Under the Tax Cuts and Jobs Act, the NOL generated from 2018 through 2024, of approximately $30.9 million, will have an indefinite carryforward period but can generally only be used to offset 80% of taxable income in any particular year. The Company may be subject to certain limitations in its annual utilization of NOL carry forwards to off-set future taxable income pursuant to Section 382 of the Internal Revenue Code, which could result in NOLs expiring unused.

 

 

The components of the deferred income tax assets and liabilities consisted of the following:

 

SCHEDULE OF DEFERRED TAX ASSETS

		2024				2023
		As of December 31,
		2024				2023
Deferred tax assets
Net operating loss carry forwards		$	12,907,965			$	12,467,570
Research and development costs			3,006,029				2,119,193
Stock compensation expense			789,373				711,598
Accrued expenses			7,330				528,148
Lease liability			389,882				512,668
Contingent liability			221,065				221,028
Acquisition liability			112,722				176,629
Bad debt and other reserves			287,900				129,924
Inventory reserves			130,605				109,176
Other temporary differences			1,049,365				203,340
Total deferred tax assets			18,902,236				17,179,274
Deferred tax liabilities
Depreciation and amortization			(5,683,259	)			(6,180,688	)
Right of Use assets			(353,763	)			(487,402	)
Accrued expenses			-				(424,423	)
Contingent liability			(38,308	)			(130,802	)
Other temporary differences			(294,608	)			(166,712	)
Valuation allowance			(12,532,298	)			(9,789,247	)
Net deferred tax asset		$	-			$	-

 

A 100% valuation allowance has been provided for all deferred tax assets, as the ability of the Company to generate sufficient taxable income in the future is uncertain.

 

 

Reconciliations of the expected federal income tax expense (benefit) based on the statutory income tax rate of 21% to the actual benefit for the years ended December 31, 2024 and 2023 are listed below.

 

SCHEDULE OF INCOME TAX EXPENSE (BENEFIT)

		2024				2023
		For the Year Ended December 31,
		2024				2023
Expected federal income tax benefit		$	(2,019,060	)		$	(903,220	)
State and local taxes, net of federal benefit			(338,138	)			(226,714	)
Fair value adjustments			(497,373	)			(819,270	)
Share-based compensation			(237,838	)			(557,168	)
Other permanent differences			199,857				118,765
NOL carryover adjustments			97,806				(5,148,128	)
Intangibles			-				(720,407	)
Other true ups			90,343				(230,474	)
Changes in tax rates			9,732				673,449
Change in valuation allowance			2,743,051				7,813,167
Income tax expense		$	48,380			$	-

 

All tax years starting with 2021 are open for examination. The Company’s 2022 federal tax return was under audit as of March 24, 2025.