Imunon, Inc. Income Taxes Disclosure

6. INCOME TAXES

 

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740)—Improvements to Income Tax Disclosures. The standard requires enhanced annual disclosures, including: (i) disaggregated information in the rate reconciliation, (ii) disaggregation of income (loss) from continuing operations before income tax expense (benefit) between domestic and foreign, (iii) disaggregation of income tax expense (benefit) from continuing operations by federal, state, and foreign, and (iv) disaggregated disclosure of income taxes paid by jurisdiction. The Company adopted ASU 2023-09 on January 1, 2025 prospectively. The adoption of ASU 2023-09 resulted in expanded income tax disclosures in this note.

 

The Company has incurred substantial net losses since inception and has not generated significant revenue. As a result, the Company has significant net operating loss (“NOL”) carryforwards and other deferred tax assets. The Company maintains a full valuation allowance against its net deferred tax assets because it has concluded that it is more likely than not that these assets will not be realized based on its history of operating losses and expectations of future taxable income.

 

 

Loss Before Income Taxes

 

Loss before income taxes was approximately $14.5 million and $18.6 million for 2025 and 2024, respectively. All these amounts are associated with domestic operations. The components of income tax expense (benefit) for the years ended December 31, 2025 and 2024 consists of the following:

 SCHEDULE OF INCOME TAX PROVISION (BENEFIT)

		2025				2024
Federal
Current		$	-			$	-
Deferred			-				-
State and Local			-				-
Current			-				-
Deferred			-				-
Total		$	-			$	-

 

The reconciliation (ASU 2023-09 tabular format) of the U.S. federal statutory income tax rate to the Company’s effective tax rate for the year ended December 31, 2025 is as follows:

 SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION

Reconciling Item						Tax Effected				% of Net Loss
Net Loss		$	(14,495,028	)		$	(3,043,956	)			21.00	%
Change in Valuation Allowance							1,215,757				(8.39	)
Federal statutory rate
State taxes, net of federal tax benefit
Permanent differences
True-Up
Rate Change
Deferred vs statutory rate
Nontaxable and Nondeductible items
Equity based comp							26,743				(0.18	)
Expired NOL’s
Federal							1,703,110				(11.75	)
Other Adjustments - Equity based comp adjustment							98,346				(0.68	)
Effective tax rate						$	-0-				- 0-	%

 

A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to loss before income taxes for the year prior to the adoption of ASU 2023-09 is as follows:

 

		2024
Federal statutory rate			21.00	%
State taxes, net of federal tax benefit (1)			8.40
Permanent differences			(2.74	)
True-Up			(0.07	)
Other			0.11
Rate Change			0.57
Deferred vs statutory rate			(0.75	)
Expiration of NOLs			(17.51	)
Change in valuation allowance and deferred rate change, net			(9.01	)
Effective tax rate			-0-	%

 

(1)

State taxes in New Jersey made up the majority (greater than 50%) of the tax effects in this category for 2024-2025.

 

 

The components of the Company’s deferred tax asset as of December 31, 2025 and 2024 are as follows:

 SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES

		2025				2024
		December 31,
		2025				2024
Net operating loss carryforwards		$	75,150,030			$	66,141,490
Section 174			-				6,482,099
Other deferred tax assets, net			1,628,991				2,010,744
Subtotal			76,779,021				74,634,333
Valuation allowance			(76,779,021	)			(74,634,333	)
Total deferred tax asset		$	-			$	-

 

The evaluation of the realizability of such deferred tax assets in future periods is made based upon a variety of factors that affect the Company’s ability to generate future taxable income, such as intent and ability to sell assets and historical and projected operating performance. As of December 31, 2025, based on the Company’s history of earnings and its assessment of future earnings, management believes that it is more likely than not future taxable income will not be sufficient to realize the deferred tax assets. Therefore, full valuation allowance has been applied to deferred tax assets.

 

As of December 31, 2025, the Company had federal net operating loss carry forwards of approximately $333 million. If unused, $194 million will expire starting in 2026 through 2037. The federal NOLs generated for the years ended after 2017 of approximately $139 million can be carried forward indefinitely, subject to certain limitations. As of December 31, 2025, the Company had state net operating loss carryforwards of approximately $78 million, net of net operating losses utilized in prior years, and, if unused, will expire starting in 2029 through 2043.

 

ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. As of December 31, 2025, and 2024, there were no unrecognized tax benefits. The Company recognizes accrued interest and penalties as income tax expense. No amounts were accrued for the payment of interest and penalties at December 31, 2025 and 2024. The Company is currently not aware of any issues under review that could result in significant payments, accruals, or material deviation from its position in the next year.

 

Sections 382 and 383 of the Internal Revenue Code provide for a limitation on the annual use of NOL and tax credit carryforwards following certain ownership changes that could limit the Company’s ability to utilize these carryforwards. The Company has completed an analysis to determine if such ownership changes have occurred and concluded it was more likely than not that there were changes in ownership. Due to the existence of full valuation allowance, limitations under Section 382 and 383 will not impact the Company’s effective tax rate. Further analyses will be performed prior to recognizing the benefits of any losses or credits in the financial statements.

 

The Company incurs research and development (“R&D”) expenditures that are subject to the provisions of Section 174 of the Internal Revenue Code. Under prior law, R&D expenditures were required to be capitalized and amortized over five years for domestic activities and fifteen years for foreign activities. During fiscal year 2025, changes in U.S. federal tax law became effective that permit the immediate deduction of certain domestic R&D expenditures for tax purposes. The Company has applied the provisions of the enacted tax law in accordance with ASC 740, Income Taxes, in the period in which the law became effective.

 

There were no income taxes paid or refunds received for the years ended December 31, 2025 and 2024.

 

On July 4, 2025, the U.S. federal government enacted the One Big Beautiful Bill Act (OBBBA), which includes significant tax changes, most notably the reinstatement of the immediate expensing of domestic R&D expenditures, effective in fiscal 2025 and 2026. The deductibility of these expenditures reduced our deferred tax assets for periods starting in fiscal 2025. The Company had approximately $23 million of capitalized Section 174 expenses, which Company elected to deduct in 2025 tax year.