PULSE BIOSCIENCES, INC. Income Taxes Disclosure

12. Income Taxes 

 

Total loss before income taxes for the years ended December 31, 2025 and 2024 were $72.8 million and $53.6 million, respectively. All losses were domestic and there were no foreign losses. 

 

During the years ended December 31, 2025 and 2024, the Company did not recognize an income tax provision.

 

The provision for income taxes differs from the amount estimated by applying the statutory federal income tax rate to net loss before taxes as follows:

 

		Year Ended December 31,
		2025								2024
Tax at federal statutory rate		$	(15,284	)			21.0	%		$	(11,253	)			21.0	%
State income tax, net of federal tax benefit1			21				—				(2,993	)			5.6
Research and development credits			(1,028	)			1.4				(901	)			1.7
Nontaxable or nondeductible items
Stock-based compensation			1,043				(1.4	)			561				(1.0	)
Other			533				(0.7	)			26				(0.1	)
Changes in unrecognized tax benefits			494				(0.7	)			3,444				(6.4	)
Change in valuation allowance			14,221				(19.6	)			11,116				(20.8	)
Effective Tax Rate		$	—				—	%		$	—				—	%

___________________

1  State taxes in California comprise the majority (greater than 50 percent) of the state and local income taxes, net of federal effect category for both 2024 and 2025.

 

Deferred income taxes reflect the impact of carryforwards and temporary differences between the amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws. The carryforwards and temporary differences, which give rise to a significant portion of the Company’s deferred tax assets and liabilities as of December 31, 2025 and 2024, are as follows (in thousands):

 

		December 31,
		2025				2024
Deferred tax assets
Accruals		$	503			$	1,218
Net operating loss carryforwards			74,859				66,952
Tax credit carryforwards			12,008				10,838
Stock-based compensation			14,450				9,588
R&D capitalization			18,527				10,358
Lease liability			1,890				1,869
Property and equipment			43				35
Intangible assets			544				279
Gross deferred tax assets			122,824				101,137
Valuation allowance			(121,249	)			(99,542	)
Total deferred tax assets			1,575				1,595
Deferred tax liabilities
Right-of-use assets			(1,575	)			(1,595	)
Total deferred tax liabilities			(1,575	)			(1,595	)
Net deferred tax assets/(liabilities)		$	—			$	—

 

The Company’s unrecognized tax benefits as of December 31, 2025 and 2024 were $18.5 million and $17.4 million, respectively. If recognized, none of the unrecognized tax benefits would impact income tax expense to the extent that the Company continues to maintain a full valuation allowance against its deferred tax assets.

 

A reconciliation of the beginning and ending amounts of unrecognized tax benefit is as follows (in thousands):

 

		December 31,
		2025				2024
Unrecognized tax benefits at beginning of year		$	17,376			$	10,170
Increases related to current year tax positions			1,405				4,366
Increases related to prior year tax positions			—				2,993
Decreases related to prior year tax positions			(255	)			(153	)
Unrecognized tax benefits at end of year		$	18,526			$	17,376

 

The Company’s policy is to recognize interest and penalties related to income taxes as components of interest expense and other expense, respectively. The Company did not accrue interest and penalties related to unrecognized tax benefits as of December 31, 2025 and does not anticipate any significant change within twelve months of this reporting date.

 

The Company’s valuation allowance increased by $21.7 million in the year ended December 31, 2025 and increased by $11.7 million in the year ended December 31, 2024.

 

As of December 31, 2025, the Company had federal and state net operating loss (“NOL”) carryforwards of $575.0 million which begin to expire in 2034. Of the $281.9 million of federal NOLs, $256.3 million is carried forward indefinitely but is limited to 80% of the taxable income.

 

As of December 31, 2025, the Company had U.S. federal and California research and development (“R&D”) tax credits of approximately $10.5 million, and $10.6 million, respectively. The federal R&D credits begin to expire in 2035, while California credits do not expire.

 

The Company is subject to taxation in the United States for Federal and State. All jurisdictions and tax years currently remain open for IRS examination. As of December 31, 2025, the Company was not under examination by the Internal Revenue Service or any state tax jurisdiction.

 

Internal Revenue Code Section 382 ownership change generally occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules may apply under state tax laws. We believe that we have had one or more ownership changes prior to 2018, but recently performed a Section 382 study to analyze fiscal years 2018 through 2024, and we do not believe that we have had any additional ownership changes over that period. Possible future changes in our stock ownership could result in limitations.

 

On July 4, 2025, H.R. 1, a U.S. budget reconciliation bill, was signed into law. The Company has assessed the provisions of the new legislation and has integrated the resulting impacts into its effective income tax rate. Management has concluded that the bill does not have an impact on the Company's consolidated financial statements for the current period.