KYNTRA BIO, INC. Income Taxes Disclosure
14. Income Taxes
The components of loss before income taxes are as follows (in thousands):
|
|
Years Ended December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Domestic |
|
$ |
(47,917 |
) |
|
$ |
(142,819 |
) |
Foreign |
|
|
(10,377 |
) |
|
|
(10,548 |
) |
Loss before benefit for income taxes |
|
$ |
(58,294 |
) |
|
$ |
(153,367 |
) |
The benefit for income taxes consists of the following (in thousands):
|
|
Years Ended December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Current: |
|
|
|
|
|
|
||
Federal |
|
$ |
— |
|
|
$ |
— |
|
State |
|
|
— |
|
|
|
— |
|
Foreign |
|
|
(90 |
) |
|
|
(269 |
) |
Total current |
|
|
(90 |
) |
|
|
(269 |
) |
Deferred: |
|
|
|
|
|
|
||
Federal |
|
|
— |
|
|
|
— |
|
State |
|
|
— |
|
|
|
— |
|
Foreign |
|
|
— |
|
|
|
— |
|
Total deferred |
|
|
— |
|
|
|
— |
|
Benefit from income taxes |
|
$ |
(90 |
) |
|
$ |
(269 |
) |
A reconciliation of the benefit for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to income before income taxes for the year ended December 31, 2025, after the adoption of ASU 2023-09, is as follows:
|
Years Ended December 31, 2025 |
|
|||||
|
Amount |
|
|
% |
|
||
Tax at statutory federal rate |
$ |
(12,242 |
) |
|
|
21.0 |
% |
State tax, net of federal benefit |
|
— |
|
|
|
— |
% |
Foreign Tax Effects |
|
|
|
|
|
||
Foreign Rate Differential – Cayman Islands |
|
2,110 |
|
|
|
(3.6 |
)% |
Foreign Rate Differential – Finland |
|
76 |
|
|
|
(0.1 |
)% |
Effect of cross-border tax laws |
|
|
|
|
|
||
Global intangible low-taxed income |
|
62,730 |
|
|
|
(107.6 |
)% |
Other |
|
(90 |
) |
|
|
0.2 |
% |
Tax credits |
|
578 |
|
|
|
(1.0 |
)% |
Change in valuation allowance |
|
(59,391 |
) |
|
|
101.9 |
% |
Worldwide changes in unrecognized tax benefits |
|
(180 |
) |
|
|
0.3 |
% |
Nondeductible items |
|
|
|
|
|
||
Stock based compensation |
|
5,591 |
|
|
|
(9.6 |
)% |
Disallowed interest |
|
448 |
|
|
|
(0.8 |
)% |
Other |
|
9 |
|
|
|
— |
% |
Other |
|
271 |
|
|
|
(0.5 |
)% |
Total |
$ |
(90 |
) |
|
|
0.2 |
% |
The following is the reconciliation between the statutory federal income tax rate and the Company’s effective tax rate for year ended in December 31, 2024, prior to the adoption of ASU 2023-09, is as follows:
|
Years Ended December 31, |
|
|
|
2024 |
|
|
Tax at statutory federal rate |
|
21.0 |
% |
State tax |
|
— |
% |
Stock-based compensation expense |
|
(3.2 |
)% |
Net operating losses not benefitted |
|
(13.9 |
)% |
Foreign net operating losses not benefitted |
|
(1.4 |
)% |
Deduction limitation on executive compensation |
|
— |
% |
Global intangible low-taxed income |
|
(2.1 |
)% |
Other |
|
(0.2 |
)% |
Total |
|
0.2 |
% |
Significant components of the Company’s deferred tax assets are as follows (in thousands):
|
|
December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Federal and state net operating loss carryforwards |
|
$ |
173,195 |
|
|
$ |
206,365 |
|
Tax credit carryforwards |
|
|
128,924 |
|
|
|
129,320 |
|
Foreign net operating loss carryforwards |
|
|
112 |
|
|
|
120 |
|
Capitalized research and development expenses |
|
|
64,293 |
|
|
|
83,329 |
|
Stock-based compensation |
|
|
2,128 |
|
|
|
6,365 |
|
Lease obligations |
|
|
12 |
|
|
|
22 |
|
Reserves and accruals |
|
|
4,760 |
|
|
|
4,418 |
|
Deferred revenue |
|
|
— |
|
|
|
7,785 |
|
Intangible assets |
|
|
14,135 |
|
|
|
15,036 |
|
Other |
|
|
6 |
|
|
|
— |
|
Subtotal |
|
|
387,565 |
|
|
|
452,760 |
|
Less: Valuation allowance |
|
|
(387,555 |
) |
|
|
(452,740 |
) |
Net deferred tax assets |
|
|
10 |
|
|
|
20 |
|
|
|
|
|
|
|
|
||
Fixed assets |
|
|
(10 |
) |
|
|
(20 |
) |
Non-deductible accrued expenses |
|
|
— |
|
|
|
— |
|
Net deferred tax liabilities |
|
|
(10 |
) |
|
|
(20 |
) |
Total net deferred tax assets |
|
$ |
— |
|
|
$ |
— |
|
A valuation allowance has been provided to reduce the deferred tax assets to an amount management believes is more likely than not to be realized. Expected realization of the deferred tax assets for which a valuation allowance has not been recognized is based on upon the reversal of existing temporary differences and future taxable income.
The valuation allowance decreased by $65.2 million for the year ended December 31, 2025 and increased by $26.4 million for the years ended December 31, 2024. Due to uncertainty surrounding the realization of the favorable tax attributes in the future tax returns, the Company has established a valuation allowance against its otherwise recognizable net deferred tax assets.
The Company intends to continue maintaining a full valuation allowance on its deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of this allowance.
At December 31, 2025, the Company had net operating loss carryforwards available to offset future taxable income of approximately $787.4 million and $145.4 million for federal and state tax purposes, respectively. $140.5 million of the federal net operating loss carryforwards will begin to expire in 2035 if not utilized, while the remainder can be carried forward indefinitely. The state net operating loss carryforward will begin to expire in 2031 if not utilized. The Company also had foreign net operating loss carryforwards of approximately $0.6 million, which expire between 2026 and 2034 if not utilized.
At December 31, 2025, the Company had approximately $153.8 million of federal and $53.7 million of California research and development tax credit and other tax credit carryforwards available to offset future taxable income. The federal credits begin to expire in 2026 and the California research credits have no expiration dates.
Federal and state tax laws impose substantial restrictions on the utilization of net operating loss and credit carryforwards in the event of an “ownership change” for tax purposes, as defined in Internal Revenue Code (“IRC”) Section 382. The Company performed an IRC Section 382 analysis and has determined that there were no ownership changes as of December 31, 2024. Thus, IRC Section 382 will not limit the use of the Company’s net operating loss and tax credit carryforwards. The Company will continue to monitor trading activities in its shares which could cause ownership change in future years.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law. The OBBBA makes permanent key elements of the Tax Cuts and Jobs Act, including restoring 100% bonus depreciation, eliminating the capitalization requirement for domestic research and experimentation, and changing the business interest expense limitation. ASC 740 requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation was enacted in the third quarter of 2025. The provisions do not have a material impact on the Company’s financial statements.
Uncertain Tax Positions
The Company had unrecognized tax benefits of approximately $74.5 million as of December 31, 2025. Approximately $0.4 million of unrecognized tax benefits, if recognized, would affect the effective tax rate. The interest accrued as of December 31, 2025 and 2024 was immaterial.
A reconciliation of the beginning and ending amounts of unrecognized income tax benefits during the two years ended December 31, 2025 is as follows (in thousands):
|
|
Federal and State |
|
|
Balance as of December 31, 2023 |
|
$ |
70,710 |
|
Decrease due to prior positions |
|
|
(156 |
) |
Increase due to current year position |
|
|
3,920 |
|
Foreign exchange rate differential |
|
|
(153 |
) |
Balance as of December 31, 2024 |
|
|
74,321 |
|
Decrease due to prior positions |
|
|
(229 |
) |
Increase due to current year position |
|
|
372 |
|
Foreign exchange rate differential |
|
|
— |
|
Balance as of December 31, 2025 |
|
$ |
74,464 |
|
Unrecognized tax benefits may change during the next twelve months for items that arise in the ordinary course of business.
The Company classifies interest and penalties as a component of tax expense, if any.
The Company files income tax returns in the U.S. federal jurisdiction, U.S. state and other foreign jurisdictions. The U.S. federal and U.S. state taxing authorities may choose to audit tax returns for tax years beyond the statute of limitation period due to significant tax attribute carryforwards from prior years, making adjustments only to carryforward attributes. The foreign statute of limitation generally remains open from . The Company is not currently under audit in any tax jurisdiction. The Company did not have any cash payment for income taxes for the years ended December 31, 2025 and 2024.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 16, 2026 | Showing above |
| 2024 | Mar 17, 2025 | |
| 2023 | Feb 26, 2024 | |
| 2022 | Feb 27, 2023 | |
| 2021 | Feb 28, 2022 | |
| 2020 | Mar 1, 2021 | |
| 2019 | Mar 2, 2020 | |
| 2018 | Feb 27, 2019 | |
| 2017 | Feb 27, 2018 | |
| 2016 | Mar 1, 2017 | |
| 2015 | Feb 29, 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.