ATOSSA THERAPEUTICS, INC. Income Taxes Disclosure
NOTE 12: INCOME TAXES
The Company adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, on a prospective basis effective January 1, 2025. A reconciliation of the income tax benefit calculated at the U.S. federal statutory rate to the recognized income tax benefit and effective income tax rate is as follows (in thousands, except percentages):
|
|
As of December 31, 2025 |
|
|||||
|
|
Amount |
|
|
Percent |
|
||
Income tax benefit at the U.S. federal statutory rate |
|
$ |
(7,302 |
) |
|
|
21.0 |
% |
State income taxes, net of federal income tax effect |
|
|
— |
|
|
|
0.0 |
% |
Foreign tax effects |
|
|
|
|
|
|
||
Australia |
|
|
|
|
|
|
||
Statutory tax rate difference between Australia and U.S. |
|
|
(31 |
) |
|
|
0.1 |
% |
Change in valuation allowance |
|
|
22 |
|
|
|
-0.1 |
% |
Other |
|
|
85 |
|
|
|
-0.2 |
% |
Effect of changes in tax laws or rates enacted in the current period |
|
|
— |
|
|
|
0.0 |
% |
Effect of cross border tax laws |
|
|
(76 |
) |
|
|
0.2 |
% |
Tax credits |
|
|
— |
|
|
|
0.0 |
% |
Change in valuation allowance |
|
|
7,278 |
|
|
|
-20.9 |
% |
Non taxable or non deductible items |
|
|
|
|
|
|
||
Other non-taxable income & disallowed expenses |
|
|
173 |
|
|
|
-0.5 |
% |
Other |
|
|
(149 |
) |
|
|
0.4 |
% |
Changes in unrecognized tax benefits |
|
|
— |
|
|
|
0.0 |
% |
Income tax benefit |
|
$ |
— |
|
|
|
0.0 |
% |
|
|
|
|
|
|
|
||
|
|
|
|
|
As of December 31, 2024 |
|
|
Expected federal income tax benefit at statutory rate |
$ |
(5,356 |
) |
Disallowed R&D expenses |
|
3 |
|
Non-taxable R&D rebate |
|
— |
|
Other permanent items |
|
235 |
|
Return to provision |
|
57 |
|
Stock-based compensation |
|
246 |
|
Foreign rate differential |
|
(76 |
) |
Other |
|
21 |
|
Effect of change in valuation allowance |
|
4,870 |
|
Income tax benefit |
$ |
— |
|
|
|
|
|
The following table summarizes the significant components of the Company's deferred tax assets and liabilities (in thousands):
|
|
As of December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Deferred tax assets |
|
|
|
|
|
|
||
Accrued bonus |
|
$ |
143 |
|
|
$ |
274 |
|
Accrued vacation |
|
|
45 |
|
|
|
47 |
|
Stock-based compensation |
|
|
4,887 |
|
|
|
4,265 |
|
Capitalized R&D expenses |
|
|
300 |
|
|
|
7,825 |
|
Rebate reserve |
|
|
153 |
|
|
|
220 |
|
Intangible assets, net |
|
|
113 |
|
|
|
181 |
|
Investment in equity securities |
|
|
987 |
|
|
|
987 |
|
Net operating loss carryforwards |
|
|
30,091 |
|
|
|
15,716 |
|
Other |
|
|
98 |
|
|
|
48 |
|
Total gross deferred tax asset |
|
|
36,817 |
|
|
|
29,563 |
|
Valuation allowance |
|
|
(36,817 |
) |
|
|
(29,516 |
) |
Net deferred tax assets |
|
|
— |
|
|
|
47 |
|
Deferred tax liabilities |
|
|
|
|
|
|
||
Bonus compensation |
|
|
— |
|
|
|
(47 |
) |
Net deferred tax assets |
|
$ |
— |
|
|
$ |
— |
|
As of December 31, 2025 and 2024, a valuation allowance was established against the Company's net deferred tax assets due to the uncertainty regarding the realization of such assets as evidenced by the cumulative losses from operations through December 31, 2025 and 2024. The total valuation allowance increased by $7.3 million for the year ended December 31, 2025 primarily as a result of an increase in net operating loss carryforwards, partially offset by a reduction in deferred tax assets related to previously capitalized R&D expenses.
The Company has incurred net operating losses since inception. At December 31, 2025, the Company had domestic federal net operating loss (NOL) carryforwards of $186.7 million and foreign NOL carryforwards of $1.7 million. The 2017 Tax Cut and Jobs Act (the Act) generally allows federal losses generated after 2017 to be carried forward indefinitely, but also limits the NOL deduction to the lesser of the NOL carryover or 80% of a corporation's taxable income (subject to Section 382 of the Internal Revenue Code of 1986, as amended (the IRC). Additionally, there is no carryback for losses generated after 2017. Losses generated prior to 2018 are deductible using the lesser of a corporation's NOL carryover or 100% of a corporation's taxable income and have a 20 year carryforward period. Federal NOL carryforwards generated prior to 2018 expire at various dates beginning 2029 through 2037. Foreign NOLs do not expire.
The future utilization of the federal NOL carryforwards to offset future taxable income may be subject to an annual limitation as a result of ownership changes that may have occurred previously or may occur in the future. The IRC limits a Company's ability to utilize certain NOL carry forwards in the event of a cumulative change in ownership in excess of 50% (by value) defined in the IRC. The Company has not completed a study to assess whether an ownership change, as defined by the IRC, had occurred since its inception.
The Company has no unrecognized tax positions as of December 31, 2025 or 2024 and does not believe there will be any material changes in its unrecognized tax positions over the next 12 months. The Company has not incurred any interest or penalties related to unrecognized tax positions for the years ended December 31, 2025 or 2024.
The Company files income tax returns in the U.S. and Australia. The Company has incurred net losses since inception and has not been audited for any open taxation years. As such, all tax years remain open for federal tax examinations in the U.S. For Australia, tax years from 2020 to present remain open and subject to audit.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 25, 2026 | Showing above |
| 2024 | Mar 25, 2025 | |
| 2023 | Apr 1, 2024 | |
| 2022 | Mar 22, 2023 | |
| 2021 | Feb 28, 2022 | |
| 2020 | Mar 31, 2021 | |
| 2019 | Mar 26, 2020 | |
| 2018 | Mar 28, 2019 | |
| 2017 | Mar 8, 2018 | |
| 2016 | Mar 16, 2017 | |
| 2015 | Mar 30, 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.