Enveric Biosciences, Inc. Income Taxes Disclosure

NOTE 10. INCOME TAXES

 

The Company’s U.S. and foreign loss before income taxes are set forth below:

SCHEDULE OF EARNING (LOSS) BEFORE INCOME TAX 

		2025				2024
		December 31,
		2025				2024
United States		$	(7,463,931	)		$	(7,465,630	)
Foreign			(1,308,056	)			(2,100,427	)
Total		$	(8,771,987	)		$	(9,566,057	)

 

For the years ended December 31, 2025 and 2024, the Company recorded income tax expense of $— and $8,930, respectively. The income tax expense is as follows:

SCHEDULE OF INCOME TAX EXPENSE BENEFITS 

		December 31,
		2025				2024
Current:
Federal		$	—			$	—
State			—				(8,930	)
Foreign			—			$	—
Total current income tax (expense) benefit		$	—			$	(8,930	)
Deferred:
Federal		$	—			$	—
State			—				—
Foreign			—				—
Total deferred income tax (expense) benefit		$	—			$	—
Total income tax expense		$	—			$	(8,930	)

 

 

ENVERIC BIOSCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

The Company elected to prospectively adopt the guidance in ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. The following table reconciles the U.S. federal statutory income tax rate of 21% to the Company’s effective income tax rate for the year ended December 31, 2025 in accordance with the guidance in ASU 2023-09:

SCHEDULE OF EFFECTIVE STATUTORY INCOME TAX RATE 

		Amount				Percentage
		2025
		Amount				Percentage
Income before provision for income taxes		$	(8,771,987	)
U.S. Federal Statutory Tax Rate at 21%			(1,842,117	)			21.00	%
Foreign tax rate differential
Non-deductible expenses
Deferred true-up
State and Local Income Taxes, Net of Federal Income Tax Effect *
State Changes in Valuation Allowances*			(11,600	)			(0.1	)%
State Prior Year True Up*			(97,438	)			1.1	%
State Change in Tax Rate*			158,813				(1.8	)%
State Taxes - Deferred, net of FBOS*			(32,977	)			0.4	%
Other*			311				0.0	%
Foreign Tax Effects
Canada
Change in VA			566,162				(6.4	)%
CTA			(221,721	)			2.5	%
Other			(70,980	)			0.8	%
Australia
Change in VA			(756	)			—	%
Prior Year True Up			33,019				(0.3	)%
Other			(31,052	)			0.4	%
Changes in Valuation Allowances			1,541,143				(17.5	)%
Non-taxable or Non-deductible Items
Other			9,193				(0.1	)%
Total Income Tax Provision		$	—				—	%

 

(*)

State taxes in Florida and Massachusetts comprise the majority (greater than 50%) of the tax effect in this category.

 

 

ENVERIC BIOSCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

The reconciliation of the U.S. statutory rate of 21% to the Company’s effective tax rate for the year ended December 31, 2024 in accordance with the guidance prior to the adoption of ASU 2023-09 is summarized as follows:

 

 

The Company’s deferred tax assets and deferred tax liabilities consist of the following:

SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES 

		2025				2024
		December 31,
		2025				2024
Deferred tax assets:
Net operating loss carryforwards		$	14,326,503			$	12,010,882
Stock-based compensation			969,259				938,457
Research and development capitalized expenses			321,723				563,389
Intangible amortization			100,147				111,471
Other			32,892				31,376
Less valuation allowances			(15,750,524	)			(13,655,575	)
Net deferred tax assets		$	—			$	—

 

The Company had the following potentially utilizable net operating loss tax carryforwards:

SCHEDULE OF OPERATING LOSS CARRY FORWARDS 

		2025				2024
		December 31,
		2025				2024
Federal		$	37,815,890			$	30,086,333
State		$	16,861,207			$	14,467,439
Foreign		$	19,671,743			$	17,543,639
Net operating loss tax carryforwards		$	19,671,743			$	17,543,639

 

The Tax Cuts and Jobs Act of 2017 (the “TCJA”) limits the net operating loss deduction to 80% of taxable income for losses arising in tax years beginning after December 31, 2017. As of December 31, 2025, the Company had federal net operating loss carryforwards of $37,815,890 which can be carried forward indefinitely, state net operating losses carryforwards of $16,861,207, of which $10,405,652 can be carried forward indefinitely and remainder can be carried 20 years and Canadian net operating loss carryforwards of $19,671,743, of which $18,346,574 will begin to expire in 2040 and the remainder is carried forward indefinitely.

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not 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. The valuation allowance increased by $2,094,949 and $817,820 during the years ended December 31, 2025 and 2024, respectively.

 

The Company files U.S. federal and state returns. The Company’s foreign subsidiary also files a local tax return in their local jurisdiction. From a U.S. federal, state and Canadian perspective the years that remain open to examination are consistent with each jurisdiction’s statute of limitations.

 

 

ENVERIC BIOSCIENCES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Section 382

 

The utilization of the Company’s net operating losses may be subject to a substantial limitation in the event of any significant future changes in its ownership structure under Section 382 of the Internal Revenue Code and similar state provisions. Such limitation may result in the expiration of the net operating loss carryforwards before their utilization. The Company has not conducted any studies to determine annual limitations, if any, that could result from such changes in ownership.

 

Section 174

 

Beginning in 2022, the TCJA eliminated the option to deduct research and development expenditures in the current year and requires taxpayers to amortize US expenses over five years and foreign expense over fifteen years pursuant to IRC Section 174. During the years ended December 31, 2025 and 2024, the Company has estimated and capitalized gross $49,422 and $202,147, respectively, of research and development expenditures. This did not have a material impact on the Company’s tax liability for the years ended December 31, 2025 and 2024. The Company will continue to evaluate the impact of these tax law changes on the current and future periods.

 

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted, amending U.S. tax law in several areas, including domestic research and development deductibility and bonus depreciation. The Company has included the estimated effect of provisions relevant to the current fiscal year in its reported income tax expense as of December 31, 2025. As a result of the OBBBA in the current period, the federal net operating loss was further increased driven by the deductibility of pre-2025 R&D expenses. There was little to no impact on the effective tax rate. Management is continuing to evaluate the OBBBA’s potential impact on future periods, particularly with respect to deferred tax assets and liabilities, the effective tax rate, and cash tax obligations.