Matinas BioPharma Holdings, Inc. Income Taxes Disclosure

Note 13 – Income Taxes

 

The Company utilizes the liability method of accounting for deferred income taxes. Under this method, deferred tax liabilities and assets are recognized for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. A valuation allowance is established against deferred tax assets when, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company’s policy is to record interest and penalties on uncertain tax positions as income tax expense. As of December 31, 2025 and 2024, the Company does not believe any material uncertain tax positions were present. Accordingly, interest and penalties have not been accrued due to an uncertain tax position.

 

The components of the income tax provision are as follows:

 Schedule of Income Tax Provision

		2025				2024
		Year Ended December 31,
		2025				2024
Current expense (benefit):
Federal		$	—			$	—
State			7				4
Foreign			—				—
Total current expense (benefit):		$	7			$	4
Deferred expense (benefit):
Federal		$	—			$	(84	)
State			—				—
Foreign			—				—
Total deferred expense (benefit):		$	—			$	(84	)
Total income tax expense (benefit):		$	7			$	(80	)

 

Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A reconciliation of the statutory U.S. federal rate to the Company’s effective tax rate after the adoption of ASU 2023-09 is as follows:

 Schedule of Effective Income Tax Rate Reconciliation

U.S. Federal Statutory Tax Rate		$	(2,171	)			21.00	%
		Year Ended December 31,
		2025
U.S. Federal Statutory Tax Rate		$	(2,171	)			21.00	%
State and Local Income Taxes, Net of Federal Income Tax Effect (a)			6				(0.06	)%
							(1.87
							0.00
Change in Valuation Allowances			1,405				(13.59	)%
							0.02
Nontaxable or Nondeductible Items
Warrants			717				(6.94	)%
Other			50				(0.48	)%
Effective Tax Rate		$	7				(0.07	)%

 

(a)

State taxes in New Jersey made up the majority (greater than 50 percent) of the tax effect in this category.

 

 

As previously disclosed for the year ended December 31, 2024 prior to the adoption of ASU 2023-09, the following is a reconciliation of the difference between the effective income tax rate and federal statutory rate:

 

		Year Ended December 31,
		2024
Income at U.S. Statutory Rate			21.00	%
State Taxes, net of Federal benefit			6.53	%
Permanent Differences			(1.87	)%
Tax Credits			0.00	%
Valuation Allowance			(25.35	)%
Discrete Items			0.02	%
			0.33	%

 

The following table presents income taxes paid (net of refunds received) during the year ended December 31, 2025 by jurisdiction:

 Schedule of Income Taxes Paid (Net of Refunds Received)

		Year Ended December 31,
		2025
U.S. federal taxes		$	—
State and local taxes
Massachusetts			1
New Jersey			6
Total income taxes paid		$	7

 

The Company has no current income taxes payable other than certain state minimum taxes which are included in general and administrative expenses. The $80 income tax benefit recognized during the year ended December 31, 2024, primarily relates to a reduction in the deferred tax liability associated with the Company’s IPR&D, which was impaired during the year.

 

Significant components of the Company’s deferred tax assets (liabilities) for 2025 and 2024 consist of the following:

 Schedule of Deferred Tax Assets and Liabilities

		2025				2024
		Year Ended December 31,
		2025				2024
Share-based Compensation		$	2,931			$	5,282
Depreciation and Amortization			213				451
Accrued Liability			42				279
Net Operating Loss Carry-forwards			33,362				28,270
R&D Credit Carryforwards			4,469				4,469
R&D Section 174 Costs			4,713				7,511
Other			1				31
IPR&D			(637	)			(637	)
ROU Asset			(151	)			(476	)
ROU Liability			380				811
Total Deferred tax assets		$	45,323			$	45,991
Valuation allowance			(45,580	)			(46,248	)
Net deferred tax asset (liability)		$	(257	)		$	(257	)

 

 

In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of taxable income during the periods in which the temporary differences representing net future deductible amounts become deductible and is impacted by the Company’s ability to carryforward losses to years in which the Company has taxable income. Due to the Company’s history of losses and lack of other positive evidence to support taxable income, the Company has recorded a valuation allowance against those deferred tax assets that are not expected to be realized. The valuation allowances were $45,580 and $46,248 as of December 31, 2025 and 2024, respectively, representing decrease of $668.

 

As of December 31, 2025, the Company had Federal net operating loss carryforwards of $38,080 which will begin to expire in 2032. In addition, the Company has federal net operating loss carryforwards of $106,217 which have an indefinite carryforward period. The Company also had federal and state research and development tax credit carryforwards of $4,469. The federal net operating loss and tax credit carryforwards will expire at various dates beginning in 2032, if not utilized. The difference between the statutory tax rate and the effective tax rate is primarily attributable to the valuation allowance offsetting deferred tax assets.

 

Utilization of the net operating losses and general business tax credits carryforwards may be subject to a substantial limitation under Sections 382 and 383 of the Internal Revenue Code of 1986 due to changes in ownership of the Company that have occurred previously or that could occur in the future. These ownership changes may limit the amount of net operating losses and general business tax credits carryforwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50 percentage points over a three-year period. The Company has not completed a study to determine whether it had undergone an ownership change since the Company’s inception.

 

Under the Tax Cuts and Jobs Act of 2017, research and development costs are no longer fully deductible and are required to be capitalized and amortized for U.S. tax purposes effective January 1, 2022. The mandatory capitalization requirement increases our deferred tax assets. The One Big Beautiful Bill Act (the “OBBBA”) was enacted into law on July 4, 2025. Included in the OBBBA were provisions where certain research and development expenses could be immediately expensed rather than capitalized. The Company considered the effects of the OBBBA and determined there was not a material effect on the Company’s financial statements as of December 31, 2025.