REVIVA PHARMACEUTICALS HOLDINGS, INC. Income Taxes Disclosure

8.   INCOME TAXES

 

As a result of the Company's history of net operating losses and the full valuation allowance against its deferred tax assets, there was no current or deferred income tax provision other than current state minimum taxes and current foreign taxes for the years ended December 31, 2024 and 2023.

 

Domestic and international pre-tax income/(loss) consists of the following:

 

		December 31,
		2024				2023
United States		$	(29,847,961	)		$	(39,301,700	)
International			(51,327	)			57,812
Loss before income taxes		$	(29,899,288	)		$	(39,243,888	)

 

The provision for income taxes is attributable to operations and is comprised of the following:

 

		December 31,
		2024				2023
Current:
Federal		$	—			$	—
State			2,100				2,400
Foreign			17,414				14,549
Current Total		$	19,514			$	16,949
Deferred:
Federal		$	—			$	—
State			—				—
Foreign			—				—
Deferred Total			—				—
Provision for Income Taxes		$	19,514			$	16,949

 

Reconciliations to the statutory federal income tax rate and the Company's effective tax rate consist of the following:

 

		December 31,
		2024				2023
Statutory federal income tax rate		$	(6,278,850	)		$	(8,219,715	)
State income taxes, net of federal tax benefits			127,499				(91,612	)
State True Up			2,242,134				—
Warrant Expense			(150,705	)			50,235
Stock Based Compensation			56,333				86,635
Foreign Rate Differential			(2,053	)			2,312
Other Permanent Differences			41,024				17,498
Valuation allowance			3,994,770				8,204,250
Other			(10,638	)			(32,654	)
Provision for Income Taxes		$	19,514			$	16,949

 

The components of deferred tax assets included on the balance sheet are:

 

		December 31,
		2024				2023
NOL Carryforwards			15,687,479				15,264,557
Accruals and Reserves			(28,852	)			231,425
Stock-based Compensation			1,135,026				848,987
Capitalized Section 174			14,681,051				11,017,511
Others			13,686				131,090
			31,488,340				27,493,570
Valuation allowance			(31,488,340	)			(27,493,570	)
Net deferred tax assets			—				—
Deferred income taxes		$	—			$	—

 

Management has determined based on all the available information that a 100% valuation reserve is required against its deferred tax assets due to the uncertainty surrounding realization of such assets. Total increase in the valuation allowance is $3,994,770 for the year ending December 31, 2024 and was $10,166,952 for the year ending December 31, 2023.

 

As of December 31, 2024 and 2023, the Company has U.S. Federal net operating loss carryforwards of approximately $71.8 million and $59.1 million, respectively, and state net operating loss carryforwards of approximately $8.7 million and $40.8 million, respectively. Approximately $35.9 million of the U.S. Federal losses begin to expire in 2029. The balance, all post-2017 federal net operating losses may be carried forward indefinitely. Prior to applying the valuation allowance, the deferred tax assets relate mainly to NOL carryforwards, capitalized research expenditures and stock-based compensation.

 

As of December 31, 2024, the Company had $1.5 million research and development credit carryforwards to offset federal income taxes and $0.2 million of California research credit carryforwards to offset state income taxes. Both the federal and California credits will begin to expire in 2042 if unutilized.

 

Under the provisions of the Internal Revenue Code, the NOL's and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. NOL and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code of 1986, respectively, as well as similar state tax provisions. This could limit the amount of tax attributes that the Company can utilize annually to offset future taxable income or tax liabilities. The amount of the annual limitation, if any, will be determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. The Company has completed several financings since its inception, which may have resulted in a change in control as defined by Sections 382 and 383 of the Internal Revenue Code, or could result in a change in control in the future. Utilization of the net operating loss and tax credits carryforwards may be limited by “ownership change” rules, as defined in Section 382 of the Internal Revenue Code of 1986, as amended, and similar state provisions. This annual limitation may result in the expiration of the net operating losses and credits before utilization.

 

The Company has elected to recognize interest and penalties related to uncertain tax positions as components of income tax expense. As of December 31, 2024, the Company has no accrual for payment of interest related to unrecognized tax benefits.

 

The Company’s income tax returns for all years remain open to examination by federal and state taxing authorities. The Company does not expect that its unrecognized tax benefit will change significantly in the next 12 months.

 

As of December 31, 2024 the Company has approximately $1.7 million unrecognized tax benefits that, if recognized, would change its effective rate. The Company’s unrecognized tax benefit relates entirely to the federal and California research credits. The total increase in the unrecognized tax benefits was approximately $0.9 million for the year ending December 31, 2024 and $0.7 million for the year ending December 31, 2023.

 

January 1, 2022				Prior Year Increase/ (Decrease)				Current Year Increase/ (Decrease)				December 31, 2023
$	136,931			$	25,000			$	640,640			$	802,571

 

January 1, 2024				Prior Year Increase/ (Decrease)				Current Year Increase/ (Decrease)				December 31, 2024
	802,571			$	134,291			$	768,063			$	1,704,925