Pasithea Therapeutics Corp. Income Taxes Disclosure

NOTE 9 – INCOME TAXES

 

The Company accounts for income taxes under ASC 740 - Income Taxes (“ASC 740”), which provides for an asset and liability approach of accounting for income taxes. Under this approach, deferred tax assets and liabilities are recognized based on anticipated future tax consequences, using currently enacted tax laws, attributed to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts calculated for income tax purposes.

 

Significant components of the Company’s deferred tax assets as of December 31, 2024 and 2023 are summarized below.

 

		December 31, 2024				December 31, 2023
Deferred tax assets:
Amortization		$	-			$	7,000
Research & development costs			2,917,000				1,977,000
ROU asset			-				1,000
Warrant liabilities			40,000				19,000
Stock-based compensation			307,000				430,000
Net operation loss carryforwards			8,126,000				5,146,000
Federal R&D tax credit			419,000				59,000
Total deferred tax asset			11,809,000				7,639,000
Deferred tax liabilities:
Amortization			(83,000	)			-
Depreciation			(28,000	)			(25,000	)
Net deferred tax asset			11,698,000				7,614,000
Valuation allowance			(11,698,000	)			(7,614,000	)
		$	-			$	-

The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. The Company assessed the need for a valuation allowance against its net deferred tax assets and determined a full valuation allowance is required since the Company has no history of generating taxable income. Our deferred tax asset and valuation allowance increased by $4,084,000 and $3,471,000 for the years ended December 31, 2024 and 2023, respectively.

 

A reconciliation of the federal income tax rate to the Company’s effective tax rate at December 31, 2024 and 2023 is as follows:   

 

		December 31, 2024				December 31, 2023
Statutory federal income tax rate			21.0	%			21.0	%
State taxes, net of federal tax benefit			(0.1	)%			1.7	%
Stock-based compensation			(0.6	)%			(0.9	)%
Return to provision adjustment			(0.2	)%			6.6	%
Permanent items			-	%			-	%
R&D credit generated			1.7	%
Other			-%				(6.0	)%
Change in valuation allowance			(22.3	)%			(22.4	)%
Income tax provision			(0.1	)%			—	%

 

The Company’s ability to utilize net operating loss carryforwards will depend on its ability to generate adequate future taxable income. Future utilization of the net operating loss carry forwards is subject to certain limitations under Section 382 of the Internal Revenue Code. As of December 31, 2024, the Company had federal and state net operating loss carryforwards available to offset future taxable income in the amounts of approximately $34,610,000 and $18,430,000, respectively, which do not expire.

 

The Company has evaluated its income tax positions and has determined that it does not have any uncertain tax positions. The Company will recognize interest and penalties related to any uncertain tax position through its income tax expense.

 

The Company is subject to franchise tax filing requirements in the State of Delaware.