FIREFLY NEUROSCIENCE, INC. Income Taxes Disclosure
NOTE 20: INCOME TAX
|
| December 31, 2025 |
|
| December 31, 2024 |
| ||
Domestic |
|
| (18,824 | ) |
|
| (9,437 | ) |
Foreign |
|
| (1,053 | ) |
|
| (1,023 | ) |
Total |
|
| (19,877 | ) |
|
| (10,460 | ) |
|
| December 31, 2025 |
|
| December 31, 2024 |
| ||
Domestic |
|
| - |
|
|
| - |
|
State |
|
| 5 |
|
|
| (2 | ) |
Foreign |
|
| - |
|
|
| - |
|
Total |
|
| 5 |
|
|
| (2 | ) |
The total provision for income taxes differs from the amount which would be computed by applying the U.S. income tax rate to loss before income taxes. The reasons for these differences are as follows:
|
| December 31 |
| |||||||||||||
|
| 2025 |
|
| 2024 |
| ||||||||||
Federal statutory income tax recovery |
| $ | (4,174 | ) |
|
| 21 | % |
| $ | (2,197 | ) |
|
| 21 | % |
State and local income tax, net of federal income tax effect (a) |
|
| 4 |
|
|
| 0 | % |
|
| 2 |
|
|
| 0 | % |
Foreign Tax Effects |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
Canada |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
Statutory tax rate difference between Canada and United States |
|
| - |
|
|
| 0 | % |
|
| - |
|
|
| 0 | % |
Change in valuation allowance and others |
|
| 1 |
|
|
| 0 | % |
|
| 4 |
|
|
| 0 | % |
Israel |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
Statutory tax rate difference between Israel and United States |
|
| (21 | ) |
|
| 0 | % |
|
| (20 | ) |
|
| 0 | % |
Change in valuation allowance |
|
| 241 |
|
|
| -1 | % |
|
| 232 |
|
|
| -2 | % |
Non-deductible legal costs related to acquisition |
|
| - |
|
|
| 0 | % |
|
| 260 |
|
|
| -2 | % |
Non-deductible loss on the repayment of notes |
|
| 2,257 |
|
|
| -11 | % |
|
| - |
|
|
| 0 | % |
Other Non-deductible permanent differences |
|
| 64 |
|
|
| 0 | % |
|
| 76 |
|
|
| -1 | % |
Change in valuation allowance |
|
| 1,633 |
|
|
| -8 | % |
|
| 1,641 |
|
|
| -16 | % |
Income tax expense (recovery) |
| $ | 5 |
|
|
| 0 | % |
| $ | (2 | ) |
|
| 0 | % |
(a) State tax in California made up the majority (greater than 50 percent) of the tax effect in this category.
The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities and certain carry-forward balances.
The primary components of the deferred tax assets and liabilities are as follows, for the years indicated below:
|
| December |
| |||||
|
| 2025 |
|
| 2024 |
| ||
|
|
|
| |
|
|
| |
Deferred tax assets |
|
|
| |
|
|
| |
Non-capital loss carry-forwards from Canada |
|
| 5 |
|
|
| 4 |
|
Non-capital federal loss carry-forwards from U.S. |
|
| 6,174 |
|
|
| 4,149 |
|
Non-capital state loss carry-forwards from U.S. |
|
| 598 |
|
|
| - |
|
Non-capital loss carry-forwards from Israel |
|
| 18,245 |
|
|
| 15,572 |
|
Stock-based compensation |
|
| 780 |
|
|
| 405 |
|
Research and development expenses |
|
| 202 |
|
|
| 198 |
|
Intangible asset |
|
| - |
|
|
| 221 |
|
Reserves and others |
|
| 188 |
|
|
| 152 |
|
|
|
| 26,191 |
|
|
| 20,701 |
|
Deferred tax liabilities |
|
|
| |
|
|
| |
Intangible asset |
|
| ) |
|
|
| ||
Property, plant and equipment |
|
| ) |
|
| ) | ||
|
|
| ) |
|
| ) | ||
|
|
|
| |
|
|
| |
Valuation allowances for deferred tax assets |
|
| ) |
|
| ) | ||
Net deferred tax assets |
|
| - |
|
|
| - |
|
The net deferred tax assets have been offset by a valuation allowance because it is not more likely than not the Company will realize the benefit of these deferred tax assets. The Company does have any unrecognized tax benefits as of December 31, 2025 and 2024.
At December 31, 2025, the Company's Canadian, US, and Israeli non-capital income tax losses, the benefit of which has not been recognized on the consolidated financial statements, expire as follows:
| | Canada | | | US (Federal) | | | US (State) | | | Israel | | ||||
2025 | | $ | - | | | $ | 218 | | | $ | - | | | $ | - | |
2026 | | | - | | | | 218 | | | | - | | | | - | |
2027 | | | - | | | | 218 | | | | - | | | | - | |
2028 | | | - | | | | 541 | | | | - | | | | - | |
2029 | | | - | | | | 218 | | | | - | | | | - | |
2030 | | | - | | | | 218 | | | | - | | | | - | |
2031 | | | - | | | | 218 | | | | 11 | | | | - | |
2032 | | | - | | | | 218 | | | | 30 | | | | - | |
2033 | | | - | | | | 218 | | | | 28 | | | | - | |
2034 | | | - | | | | 218 | | | | 135 | | | | - | |
2035 | | | - | | | | 218 | | | | 519 | | | | - | |
2036 | | | - | | | | 874 | | | | 386 | | | | - | |
2037 | | | - | | | | 218 | | | | 81 | | | | - | |
2038 | | | - | | | | - | | | | 85 | | | | - | |
2039 | | | - | | | | - | | | | 132 | | | | - | |
2040 | | | - | | | | - | | | | 356 | | | | - | |
2041 | | | - | | | | - | | | | 19 | | | | - | |
2042 | | | 2 | | | | - | | | | 108 | | | | - | |
2043 | | | - | | | | - | | | | 1,277 | | | | - | |
2044 | | | 16 | | | | - | | | | 8 | | | | - | |
2045 | | | 5 | | | | - | | | | 4,213 | | | | - | |
Indefinite | | | - | | | | 25,588 | | | | - | | | | 79,324 | |
| | $ | 23 | | | $ | 29,399 | | | $ | 7,388 | | | $ | 79,324 | |
The above losses in the U.S. are subject to limitation under IRC Section 382 as a result of the ownership changes on August 12, 2024, and May 5, 2025. A preliminary estimate, based on the Company’s valuation as of the dates of the ownership changes and utilizing the applicable long-term tax-exempt rate, indicates an approximate annual Section 382 limitation of $2,086. It is important to note that this limitation may be subject to certain favorable adjustments in the calculation of the annual limitation.
Included within the above presentation, the Company reduced its pre-change net operating loss carryforwards of $5,411 related to subsidiary Elminda 2022 Inc. Due to the ownership change and the determination that Elminda 2022 Inc. had no realizable value, these carryforwards are deemed to be fully limited under Section 382.
At December 31, 2025 and 2024, the Company had a cumulative carry-forward pool of Israeli research and development expenditures in the amount of $880 and $861, respectively, which will be amortized within the next two years.
The through 2024 U.S. state tax returns are subject to examination by state tax authorities.
In Canada, the taxation years of -2024 remain open to assessment by the Canadian tax authority, which the tax authority can reassess within four years of the date it sent the original notice of assessment for the tax year given the Company is not a Canadian-controlled private corporation.
In Israel, the taxation years of -2024 remain open to assessment by the Israeli tax authority, which the tax authority can reassess within four years from the end of the tax year in which the tax return is filed.
Want the next FIREFLY NEUROSCIENCE, INC. income taxes disclosure the moment it drops?
Set a Sentinel and we'll alert you the moment FIREFLY NEUROSCIENCE, INC.'s next filing hits EDGAR. No credit card, your email never gets sold.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 31, 2026 | Showing above |
| 2024 | Apr 3, 2025 | |
| 2023 | Mar 20, 2024 | |
| 2022 | Apr 17, 2023 | |
| 2021 | Apr 12, 2022 | |
| 2020 | Mar 31, 2021 | |
| 2019 | Mar 30, 2020 | |
| 2018 | Apr 1, 2019 | |
| 2017 | Apr 2, 2018 | |
| 2016 | Mar 31, 2017 | |
| 2015 | Mar 29, 2016 | |
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.