LIXTE BIOTECHNOLOGY HOLDINGS, INC. Income Taxes Disclosure

 

9.	Income Taxes

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets as of December 31, 2025 and 2024 are as follows:

Schedule of Components of Deferred Tax Assets 

		2025				2024
		December 31,
		2025				2024
Research credits		$	733,000			$	652,000
Capitalized research and development			720,000				900,000
Stock-based compensation			1,940,000				1,550,000
Net operating loss carryforwards			10,668,000				9,515,000
Other			37,000
Total deferred tax assets			14,098,000				12,617,000
Valuation allowance			(14,098,000)				(12,617,000	)
Net deferred tax assets		$	—			$	—

 

In assessing the potential 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 Company attaining future taxable income during the periods in which those temporary differences become deductible. As of December 31, 2025 and 2024, management was unable to determine if it is more likely than not that the Company’s deferred tax assets will be realized and has therefore recorded an appropriate valuation allowance against deferred tax assets at such dates.

 

The Company’s effective tax rate for the periods ended 12/31/2025 and 12/31/2024 were 0.0% for each period respectively. For the period ended 12/31/2025, the primary drivers of the variance from the statutory rate were primarily due to the full valuation allowance against deferred tax assets, and other permanent differences. For the period ended 12/31/2024, the primary drivers of the variance from the statutory rate were mainly due to the establishment of a full valuation allowance against deferred tax assets, state income tax effects, and other permanent differences. Due to the Company’s pre-tax loss position and valuation allowance, no income tax expense or benefit was recorded for the period.

 

The following is a reconciliation from the Company’s statuary rate to the effective tax rate reported in the financial statements:

Schedule of Effective Income Tax Rate 

		Years Ended December 31,
		2025								2024
U. S. federal statutory tax rate		$	(1,276,505	)			21.0	%		$	(753,053	)			21.0	%
Effects of:
State and local income taxes, net of federal benefit of state			1,264				(0.1	)%			-				-	%
Prior year true ups			(19,668	)			0.3	%			(40,668	)			1.13	%
Tax credits			(40,275	)			3.2	%			-				0.00	%
Non-Deductible or Non-Taxable Items			379				0.0	%			137,387				(3.83	)%
Change in valuation allowance			1,336,405				(24.4	)%			656,334				(18.3	)%
Effective tax rate		$	1,600				-	%			-				-	%

 

For the period ended 12/31/2025, the Company had federal and states net operating loss carryforwards of approximately $34.8M and $36.8M respectively. Of the federal amount, $14.0 have a limited carryforward period and will begin to expire in 2029 the remaining $20.8M will have an indefinite carryforward period. Of the state post-apportioned amount, $14.1M have a limited carryforward period and will begin to expire in 2038; the remaining $22.7 will have an indefinite carryforward period.

 

The Company has $732,880 of Federal, R&D tax credit carryforwards as of December 31, 2025.

 

In accordance with Section 382 and Section 383, utilization of the NOL and tax credit carryforwards may be subject to limitations based on prior or future ownership changes.

 

Additionally, after weighing up all available positive and negative evidence for the period ending 12/31/2025, the Company has recorded a full valuation allowance.

 

On July 4th, 2025, the President of the United States of America signed into law significant federal tax legislation, H.R.1 (the “Tax Reform Act of 2025”). The legislation includes numerous changes to U.S. corporate income tax law, including but not limited to permanent 100% bonus depreciation for qualified property, immediate expensing of domestic research and experimental expenditures, modifications to the limitation on business interest expense, increased Section 179 expensing limits, changes to the international tax regime, and expanded limitations on the deductibility of executive compensation under IRC Section 162(m). Most provisions are effective for tax years beginning after December 31, 2024, with certain transition rules and exceptions.

 

The Company has not recognized any significant impact from the change in the tax law.

 

 

In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, and certain corresponding provisions of state law, if a corporation undergoes an “ownership change”, which is generally defined as a greater than 50% change, by value, in the ownership of its equity over a three-year period, the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income might be limited.

 

As the Company’s net operating losses have yet to be utilized, all previous tax years since 2006 remain subject to adjustment by Federal authorities and other jurisdictions in which the Company currently operates or has operated in the past.