MIRA PHARMACEUTICALS, INC. Income Taxes Disclosure

Note 8. Income taxes

 

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 years ended December 31, 2025 and 2024 in accordance with the guidance in ASU No. 2023-09:

 

The following table reconcile the U.S. Federal statutory income tax rate to the Company’s effective income tax rate for years ended December 31, 2025 and 2024:

 

 Schedule of Reconciliation of Effective Income Tax Rate

		Amount				Rate				Amount				Rate
		Year ended December 31,
		2025								2024
		Amount				Rate				Amount				Rate
Components of loss before provision for income taxes		$	10,442,485				—			$	7,852,659				—
Provision for income taxes at U.S. federal statutory rate		$	(2,192,922	)			21.00	%		$	(1,649,058	)			21.00	%
State and local income taxes, net of federal benefit			1,182,487				(11.32	)%			(341,591	)			4.35	)%
Change in Valuation Allowance			981,605				(9.50	)%			3,311,262				(42.17	)%
Other permanent items			11,880				(0.02	)%			(1,320,613	)			16.82	%
Other adjustments			16,950				(0.16	)%			—				—	%
Total tax provision and effective tax rate		$	—				—	%		$	—				—	%

 

The significant components of the Company’s net deferred tax assets are as follows: 

 

Schedule of Deferred Tax Assets and Liabilities

		2025				2024
		As of December 31,
		2025				2024
Deferred tax assets
Net operating loss carry-forward		$	5,108,580			$	4,555,400
Section 174 Qualified Research Expenditures			1,729,805				1,232,033
Stock compensation			2,696,830				1,099,090
R&D Credit			54,092				38,640
Other			—				—
Deferred tax assets, Gross			9,589,307				6,925,163
Less: valuation allowance			(9,589,307	)			(6,925,163	)
Total net deferred tax asset		$	—			$	—

 

Beginning in 2022, in accordance with Internal Revenue Code Section 174, Qualified Research Expenditures are capitalized for tax purposes and amortized over a period of five years. Accordingly, for income tax purposes, and as of December 31, 2025 and December 31, 2024, the Company has recorded a deferred tax asset totaling approximately $9.6 million and $6.9 million, respectively, related to the timing difference between GAAP and Tax recognition of these expenditures.

 

The components of the provision for income taxes consist of the following:

Schedule of Components of Income Tax Provision

		2025				2024
		December 31,
		2025				2024
Deferred tax:
Deferred			(9,589,307	)			(3,311,252	)
Change in valuation allowance			9,589,307				3,311,252
Total deferred			—				—
Total provision for income taxes		$	—			$	—

 

ASC Topic 740 requires that a deferred tax amount be reduced by a valuation allowance if, based on the weight of available evidence it is more likely than not (a likelihood of more than 50%) that some portion or all of the deferred tax assets will not be realized. The valuation allowance should be sufficient to reduce the deferred tax asset to the amount that is more likely than not to be realized. The Company has recorded a full valuation allowance against its deferred tax assets generated by net operating loss carryforwards as it has determined that such amounts may not be recognizable, given the historical losses of the Company to date. As of December 31, 2025, the Company has a cumulative federal net operating loss carryforward of approximately $20.1 million. The net operating loss carryforwards have no expiration date.

 

 

MIRA PHARMACEUTICALS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2025 AND 2024