Nuvectis Pharma, Inc. Income Taxes Disclosure
NOTE 10 – INCOME TAXES:
| a. | The Company has not recorded an income tax benefit for years ended December 31, 2025 and 2024, respectively. The Company has incurred net pre-tax losses in the United States only for all periods presented. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the carrying amounts of existing assets and liabilities in the financial statements and their respective tax bases using tax rates expected to be in effect during the years in which the basis differences reverse. |
On July 4, 2025, the enactment of the One Big Beautiful Bill Act ("OBBBA") into law, marked a significant legislative development, resulting in substantial modifications to the U.S. tax code. The OBBBA influences multiple facets of taxation, including, but not limited to, maintaining the 21 percent corporate tax rate and makes permanent many of the beneficial expired and expiring tax provisions originally enacted in the Tax Cuts and Jobs Act of 2017, including the immediate expensing of domestic research and development expenditures, more favorable interest deductibility and 100 percent bonus depreciation with effective dates in 2025. Revisions to the international tax framework are effective in 2026. The income taxes reported for the year ended December 31, 2025 incorporate all relevant tax provisions of this new law.
b. | Tax Rates: |
Income of the Company is taxed according to the federal tax laws in the US and the relevant state laws. The U.S tax rate in 2025 and 2024 is 26.9% comprising U.S statutory tax rates of 21% and state tax rate of 5.9%. For the years ended years ended December 31, 2025 and 2024, the Company’s effective tax rate is below the federal statutory income tax rate of 21% primarily due to state income taxes, net of federal benefit and the Company’s position to establish a full valuation allowance on its deferred tax assets.
c. | Corporate Taxation in the U.S. |
The applicable corporate tax rate for the Company is 21%.
As of December 31, 2025, the Company has an accumulated tax loss carryforward of approximately $56.1 million (as of December 31, 2024, $43.0 million). Under U.S. tax laws, subject to certain limitations, carryforward tax losses originating in tax year have no expiration date, but they are limited to 80% of the company’s taxable income in any given tax year.
A reconciliation of the statutory U.S. federal rate to the Company’s effective tax rate is as follows:
| For the year-ended | |||
Percentage of pre-tax income | ||||
Statutory federal income tax rate |
| 21% |
| 21% |
State taxes, net of federal tax benefit |
| 6% |
| 6% |
R&D Tax Credit |
| (5)% |
| (5)% |
Change in valuation allowance | (22)% | (22)% | ||
Income taxes provision (benefit) | —% | —% | ||
d. | Tax Assessments |
The Company has not been taxed since its inception.
e. | Deferred Taxes |
The tax effect of temporary differences and carryforwards that give rise to significant portions of the deferred tax assets and liabilities are presented below:
| As of | | As of | |
December 31, 2025 | December 31, 2024 | |||
(in thousands USD) | (in thousands USD) | |||
Deferred tax asset: |
| |
| |
Net operating loss carry forward |
| 15,132 |
| 11,616 |
Share Compensation |
| 5,165 |
| 3,542 |
Research and Development credits |
| 52 |
| 52 |
Accruals and reserves |
| 6,227 |
| 4,318 |
Total deferred tax assets |
| 26,576 |
| 19,528 |
Valuation allowance |
| (26,576) |
| (19,528) |
Deferred tax assets recognized |
| — |
| — |
As the achievement of required future taxable income is not likely, the Company recorded a full valuation allowance. The following table presents a reconciliation of the beginning and ending valuation allowance:
| As of | | As of | |
December 31, 2025 | December 31, 2024 | |||
(in thousands USD) | (in thousands USD) | |||
Balance at beginning of the year |
| 19,528 |
| 14,491 |
Additions to valuation allowance |
| 7,048 |
| 5,037 |
Balance at end of the year |
| 26,576 |
| 19,528 |
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 11, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Mar 5, 2024 | |
| 2022 | Mar 8, 2023 | |
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.