Serina Therapeutics, Inc.SER
Serina Therapeutics, Inc. Income Taxes Disclosure
Income Taxes
As of December 31, 2025 and 2024, the balance of the gross unrecognized tax benefits was $1.0 million and $0.8 million, respectively, with no interest and penalties for both years. The Company estimates that there will be no material changes in its uncertain tax positions in the next 12 months. The Company's policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.
Domestic and international pre-tax income/(loss) consists of the following (in thousands):
| Year Ended December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| United States | $ | (19,271) | $ | (11,207) | ||||||||||
| International | 74 | — | ||||||||||||
| Loss before income taxes | $ | (19,197) | $ | (11,207) | ||||||||||
For the year ended December 31, 2025, the Company calculated an immaterial tax provision due to foreign operations. For the year ended December 31, 2024, the Company did not record a tax provision or deferred tax benefit.
The Company has historically filed state income tax returns based on the states in which its employee's reside. As a result, the Company has historically gathered the information necessary to apportion revenue, payroll, rent, and property on a state by state basis. The Company will use this information in order to allocate its current year taxable income/loss to each state based on that's state desired apportionment formula. For the years ended December 31, 2025 and 2024, the majority of the state and local income tax effect was attributable to California and Alabama. The Company is not anticipating any significant new state income returns to be filed for 2025. Franchise taxes calculated are classified as an operational expense and not a component of the income tax provision.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts for income tax purposes.
Significant components of the Company's deferred tax assets and liabilities were as follows (in thousands):
December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Deferred tax assets: | ||||||||||||||
Net operating loss | $ | 29,795 | $ | 22,465 | ||||||||||
Capital loss carryforward | 7,020 | 6,922 | ||||||||||||
| Credits | 2,966 | 2,446 | ||||||||||||
Capitalized research costs | 1,961 | 2,471 | ||||||||||||
Stock based compensation - NQSO | 1,667 | 558 | ||||||||||||
Deferred lease liability | 105 | 127 | ||||||||||||
Accruals and reserves | 229 | 221 | ||||||||||||
Amortization and patent costs | 432 | 453 | ||||||||||||
| Other | 170 | 8 | ||||||||||||
| Gross deferred tax assets | 44,345 | 35,671 | ||||||||||||
| Valuation allowance | (44,174) | (35,445) | ||||||||||||
| Total deferred tax assets | 171 | 226 | ||||||||||||
| Deferred tax liabilities: | ||||||||||||||
Fixed assets | (67) | (76) | ||||||||||||
Lease ROU asset | (104) | (150) | ||||||||||||
| Total deferred tax liabilities | (171) | (226) | ||||||||||||
| Net deferred tax assets: | $ | — | $ | — | ||||||||||
Management regularly assesses the ability to realize deferred tax assets recorded based upon the weight of available evidence, including such factors as recent earnings history and expected future taxable income on a jurisdiction by jurisdiction basis. In the event that the Company changes its determination as to the amount of realizable deferred tax assets, the Company will adjust its valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made. The Company’s management believes that, based on a number of factors, it is more likely than not, that all or some portion of the deferred tax assets will not be realized; and accordingly, for the
year ended December 31, 2025 and 2024, the Company has provided a valuation allowance against the Company’s U.S. net deferred tax assets. The net change in the valuation allowance for the year ended December 31, 2025, was an increase of $8.7 million.
As of December 31, 2025, the Company had net operating loss carryforwards for federal and state income tax purposes of approximately $106.8 million and $94.2 million, which will begin to expire in 2027 and 2026, respectively, with $82.8 million of our federal net operating loss carryforward lasting indefinitely.
As of December 31, 2025, the Company had federal and state research credit carryforwards of approximately $3.5 million and $0.4 million, respectively. The federal research credit carryforwards will begin to expire in 2026 while the California research credits carry forward have an indefinite life.
The Internal Revenue Code of 1986, as amended, imposes restrictions on the utilization of net operating losses in the event of an “ownership change” of a corporation. Accordingly, a company’s ability to use net operating losses may be limited as prescribed under Internal Revenue Code Section 382 (“IRC Section 382”). Events which may cause limitations in the amount of the net operating losses that the Company may use in any one year include, but are not limited to, a cumulative ownership change of more than 50% over a three-year period. Utilization of the federal and state net operating losses may be subject to substantial annual limitation due to the ownership change limitations provided by the IRC Section 382 and similar state provisions. Accordingly, the Merger may constitute an ownership change that may materially limit the company's use of their NOL carryforwards.
The Company files income tax returns in the U.S. federal and various state with varying statutes of limitations. The Company is generally no longer subject to tax examinations for years prior to December 31, 2020 for federal purposes and for state purposes, except in certain limited circumstances.
Rate Reconciliation
A reconciliation of the provision for income taxes to the amount computed by applying the federal statutory income tax rate of 21% to pretax income after adoption of ASU 2023-09, for the years ended December 31, 2025 and 2024 was as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| $ | (4,025) | 21.0 | % | $ | (2,340) | 21.0 | % | ||||||||||||||||
| State income taxes | (1,309) | 6.8 | % | (724) | 6.5 | % | |||||||||||||||||
| Foreign tax rate differential | 3 | — | % | — | — | % | |||||||||||||||||
| Credits | (520) | 2.7 | % | (1,109) | 10.0 | % | |||||||||||||||||
| Nondeductible items | (64) | 0.3 | % | 858 | (7.7) | % | |||||||||||||||||
| Mark-to-Market | — | — | % | 1,930 | (17.3) | % | |||||||||||||||||
| Unrealized warrant liability | (1,387) | 7.2 | % | (3,618) | 32.5 | % | |||||||||||||||||
| Valuation allowance - Federal | 5,323 | (27.8) | % | 18,526 | (166.3) | % | |||||||||||||||||
| Valuation allowance - State | 3,406 | (17.8) | % | 4,078 | (36.6) | % | |||||||||||||||||
| Loss on sale of subsidiary | — | — | % | (3,497) | 31.4 | % | |||||||||||||||||
| Other items | 228 | (1.2) | % | 47 | (0.4) | % | |||||||||||||||||
| State change in estimates and apportionment | (1,637) | 8.5 | % | (678) | 6.1 | % | |||||||||||||||||
| Acquired NOLs | — | — | % | (10,353) | 92.9 | % | |||||||||||||||||
| Acquired capital loss | — | — | % | (3,120) | 28.0 | % | |||||||||||||||||
| Total | $ | 18 | (0.10) | % | $ | — | — | % | |||||||||||||||
Uncertain Tax Positions
The Company has established a reserve against its U.S. research and development credits, with no related accrued interest. The Company does not believe it is reasonably possible that its unrecognized tax benefits will significantly change in the next twelve months.
A reconciliation of beginning and ending balances for unrecognized tax benefits is as follows (in thousands):
Balance at December 31, 2024 | $ | 816 | ||||||
Increase in balance related to tax positions taken during current year | 173 | |||||||
Balance at December 31, 2025 | $ | 989 | ||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 25, 2026 | Showing above |
| 2024 | Mar 24, 2025 | |
| 2023 | Mar 22, 2024 | |
| 2022 | Mar 31, 2023 | |
| 2021 | Mar 29, 2022 | |
| 2020 | Mar 31, 2021 | |
| 2018 | Apr 1, 2019 | |
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.