NRX Pharmaceuticals, Inc. Income Taxes Disclosure

Note 15. 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 (in thousands, except percentages):

 

		Year ended								Year ended
		December 31,								December 31,
		2025								2024
		Amount				Percentage				Amount				Percentage
U.S. Federal statutory tax rate		$	(6,010	)			21	%		$	(5,335	)			21	%
State and local income taxes, net of federal income tax effect
Other state tax expense (benefits)1			(225	)			0.79	%			(43	)			0.17	%
State valuation allowance			225				(0.79	%)			43				(0.17	%)
Changes in valuation allowances			1,334				(4.66	%)			4,757				(18.73	%)
Non-taxable or non-deductible items			—				0	%			—				0	%
Stock & warrant compensation			2,125				(7.17	%)			(566	)			2.23	%
Change in fair value of convertible notes and warrants			827				(2.89	%)			905				(3.56	%)
Gain and loss on notes conversion			1,570				(5.74	%)			268				(1.06	%)
Other			96				(0.34	%)			(29	)			0.12	%
Other adjustments			58				(0.20	%)			—				—	%
Total		$	—				—	%		$	—				—	%

 

(1)

State taxes in Virginia comprise the majority (greater than 50%) of the tax effect in this category.

 

The components of income tax provision (benefit) are as follows for years ended December 31, 2025 and 2024 (in thousands):

 

		As of December 31,
		2025				2024
Federal
Current			—				—
Deferred			(1,334	)			(4,715	)
Foreign
Current			—				—
Deferred			—				—
State and Local
Current			—				—
Deferred			(225	)			(43	)
Change in Valuation Allowance			1,559				4,758
Total		$	—			$	—

 

There were no income taxes paid or refunds received during the years ended December 31, 2025 and 2024.

 

The Company maintains a full valuation allowance on its net deferred tax asset and did not recognize an income tax benefit in the years ended December 31, 2025 and 2024 due to the uncertainty of future taxable income.

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying value of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. The temporary differences that give rise to deferred tax assets and liabilities are as follows (in thousands):

 

		As of December 31,
		2025				2024
Deferred tax assets (liabilities):
Net operating loss carryforwards		$	44,410			$	39,753
Common stock warrants			—				1,830
Section 174 capitalization			4,213				5,186
Stock-based compensation			1,715				2,034
Bonus accrual			59				119
Other			826				741
Goodwill			(8	)			—
Amortization			8				—
Amortization of right-of-use assets			135				—
Lease liability			(135	)			—
Depreciation			(2	)			2
			51,221				49,665
Valuation allowance			(51,221	)			(49,665	)
Deferred tax assets, net of allowance		$	—			$	—

 

As of December 31, 2025 and 2024, the Company had federal net operating losses of approximately $207.5 million and $187.1 million and state net operating loss carryforwards of approximately $17.6 million and $10.2 million, respectively. The federal and state  net operating loss carryforwards generated in the tax years prior to 2018 will begin to expire, if not utilized, by 2035. Certain Net Operating Losses in these jurisdictions are not subject to expiration. Utilization of the net operating loss carryforwards may be subject to an annual limitation according to Section 382 of the Internal Revenue Code of 1986 as amended, and similar provisions. 

 

ASC 740 requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. After consideration of all of the evidence, the Company has recorded a valuation allowance of $51.2 million against its deferred tax assets at December 31, 2025 because management has determined that it is more likely than not that the Company will not recognize the benefits of its federal and state deferred tax assets, primarily due to its history of cumulative net losses incurred since inception and its lack of commercialization of products or generation of revenue from product sales since inception.

 

The Company recognizes interest accrued to unrecognized tax benefits and penalties as income tax expense. The Company accrued total penalties and interest of $0 during the years ended December 31, 2025 and 2024 and in total, as of December 31, 2025 and 2024 has recognized penalties and interest of $0.

 

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which they operate. In the normal course of business, the Company is subject to examination by federal and foreign jurisdictions where applicable based on the statute of limitations that apply in each jurisdiction. As of December 31, 2025, open years related to all jurisdictions are 2024, 2023, 2022, and 2021. 

 

The Company has no open tax audits with any taxing authority as of December 31, 2025.