Cytosorbents Corp Income Taxes Disclosure

7. INCOME TAXES

In December 2023, FASB issued ASU 2023-09, Improvements to Income Tax Disclosures. The Company adopted ASU 2023-09 for the annual period beginning January 1, 2025, using a prospective transition method in accordance with ASC 740-10-65-9. Accordingly, the Company has presented the enhanced income tax disclosures, including disaggregated effective tax rate reconciliation and disaggregated income taxes paid, beginning with the year ended December 31, 2025, and has not restated prior-period comparative disclosures. The adoption of ASU 2023-09 affected only the Company’s income tax disclosures and did not have a material impact on its consolidated financial position, results of operations, or cash flows.

The Company’s consolidated loss before income taxes for the years ended December 31, 2025 and 2024 is as follows:

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The benefit for income taxes consists of the following:

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Income taxes paid (net of refunds received) for the years ended December 31, 2025 and 2024, consisted of the following:

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The Company has deemed any foreign earnings will be indefinitely reinvested. Currently, foreign operations have resulted in an accumulated deficit. The Company will continue to analyze their stance if their circumstances change in the future.

As of December 31, 2025, the Company had federal net operating loss (“NOL”) carry forwards of $118.8 million, state NOL carry forwards of $11.8 million, and foreign NOL carry forwards of $68.0 million which are available to reduce future taxable income. Any unutilized NOL carry forwards will begin to expire at various dates starting in 2026 and some may be carried indefinitely. As of December 31, 2025 and 2024, the Company had Federal and state research and development tax credit carryforwards of $2.1 million and $2.2 million (net of uncertain tax benefits), respectively, available to reduce future tax liabilities which will begin to expire at various dates starting in 2026.

The federal NOL carryforwards of $47.6 million, if not utilized, will expire between 2026 and 2038. The federal NOL carryforwards of $71.2 million generated since 2018 are subject to an 80% limitation on taxable income, do not expire and will carry forward indefinitely.

The NOL carry forwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. The NOLs may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50%, as defined under Section 382 of the Internal Revenue Code of 1986, as amended, as well as similar state tax provisions. In addition to the new provisions enacted under the Tax Cuts and Jobs Act, this could limit the amount of NOLs that the Company can utilize annually to offset future taxable income or tax liabilities. The amount of the annual limitation, if any, will generally be determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. The Company has not determined whether such a change has occurred and accordingly, the utilization of the net operating loss carryforwards may be subject to certain limitations.

Sale of NOLs

The Company may be eligible, from time to time, to receive cash from the sale of its Net Operating Losses and R&D tax credits under the State of New Jersey Technology Business Tax Certificate Transfer Program.

As of December 31, 2025, the Company has accrued a receivable $0.4 million from the approved sale of the 2024 state NOL and research and development credits. The Company expects to collect this receivable in the first half of 2026.

The principal components of the Company’s deferred tax assets and liabilities are as follows:

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In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on this assessment, management has established a full valuation allowance against all of the deferred tax assets for each period because it is more likely than not that all of the deferred tax assets will not be realized.

The changes in valuation allowance for the years ended December 31, 2025 and 2024 were $4.6 million and $2.9 million, respectively.

A reconciliation of income tax (expense) benefit at the statutory federal income tax rate and income taxes as reflected in the financial statements is as follows for the year ended December 31 2025:

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For the year ended December 31, 2025, state income taxes in New Jersey comprise the state and local income taxes, net of federal income tax effect category.

A reconciliation of income tax (expense) benefit at the statutory federal income tax rate and income taxes as reflected in the financial statements is as follows for the year ended December 31 2024:

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A reconciliation of the unrecognized tax benefit balances is as follows:

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The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and New Jersey. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2020, although NOL carryforwards and tax credit carryforwards from any year are subject to examination and adjustment for at least three years following the year in which they are fully utilized. As of December 31, 2025, no significant adjustments have been proposed relative to our tax positions.

For year ended December 31, 2025, there are no interest and penalties relating to our uncertain tax positions. The Company is accounting for an uncertain tax position of approximately $2.1 million and $2.2 million as of December 31, 2025 and 2024, respectively.