SANUWAVE Health, Inc.SNWV
SANUWAVE Health, Inc. Income Taxes Disclosure
Income Taxes
The Company files income tax returns in the United States federal jurisdiction and various state and foreign jurisdictions. The Company is subject to United States federal and state income tax examinations by tax authorities for any years that have net operating losses open until the net operating losses are used.
The components of the net income (loss) before income taxes are as follows:
| Year ended December 31, | |||||||||||
| (In thousands) | 2025 | 2024 (As restated) | |||||||||
| Domestic | $ | 11,899 | $ | (33,030) | |||||||
| Foreign | - | (26) | |||||||||
| Net income (loss) before income taxes | $ | 11,899 | $ | (33,056) | |||||||
In accordance with ASC Topic 740, Income Taxes (“ASC 740”), the Company accounts for income taxes utilizing the asset and liability method. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is provided for the deferred tax assets, including loss carryforwards, when it is more likely than not that some portion or all a deferred tax asset will not be realized.
The income tax provision (benefit) from continuing operations consists of the following:
| (In thousands) | December 31, 2025 | December 31, 2024 (As restated) | |||||||||
| Current: | |||||||||||
| Federal | $ | 40 | $ | - | |||||||
| State | 46 | 27 | |||||||||
| Foreign | - | - | |||||||||
| Current Tax Provision | $ | 86 | $ | 27 | |||||||
| Deferred: | |||||||||||
| Federal | $ | - | $ | - | |||||||
| State | - | - | |||||||||
| Foreign | - | - | |||||||||
| Deferred Tax Provision | $ | - | $ | - | |||||||
As of December 31, 2025, and 2024, the Company did not have any undistributed earnings of our foreign subsidiaries. As a result, no additional income or withholding taxes have been provided for. The Company does not anticipate any impacts of the global intangible low taxed income (“GILTI”) and base erosion anti-abuse tax (“BEAT”) and as such, the Company has not recorded any impact associated with either GILTI or BEAT.
A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to income before income taxes after the adoption of ASU 2023-09 is as follows:
| (In thousands) | For the year ended December 31, 2025 | ||||||||||
| Amount | Percent | ||||||||||
| Tax at United States statutory rate | $ | 2,499 | 21.0 | % | |||||||
State and local income taxes1 | 36 | 0.3 | |||||||||
| Changes in valuation allowance | (10,888) | (91.5) | |||||||||
| Nontaxable and nondeductible items: | |||||||||||
| Stock-based compensation | 722 | 6.9 | |||||||||
| Warrant revaluation | (1,702) | (14.3) | |||||||||
| Net operating losses limited under section 382 | 9,282 | 77.9 | |||||||||
| Other | 137 | 0.4 | |||||||||
| Effective Tax Rate | $ | 86 | 0.7 | % | |||||||
1 The states and local jurisdictions that contribute to the majority (greater than 50%) of the tax effect in this category include Texas.
A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to income before income taxes for the year prior to adoption of ASU 2023-09 is as follows:
| (In thousands) | For the year ended December 31, 2024 (As restated) | ||||
| Tax benefit at statutory rate | $ | (6,942) | |||
| Increase (reduction) in income taxes resulting from: | |||||
| State income tax benefits, net of federal benefit | 10 | ||||
| Non-deductible gain on warrant adjustment valuation | 6,596 | ||||
| Change in valuation allowance | (1,177) | ||||
| Warrant revaluation | 1,264 | ||||
| Other | 276 | ||||
| Effective Tax Rate | $ | 27 | |||
The tax effects of temporary differences that give rise to the deferred tax assets are as follows:
| (In thousands) | December 31, 2025 | December 31, 2024 (As restated) | |||||||||
| Deferred Tax Assets | |||||||||||
| Net operating loss carryforwards | $ | 28,798 | $ | 41,276 | |||||||
| Net operating loss carryforwards - foreign | 19 | 19 | |||||||||
| Excess of tax basis over book value of property and equipment | - | 53 | |||||||||
| Excess of tax basis over book value of intangible assets | 775 | 961 | |||||||||
| Lease liability | 219 | 110 | |||||||||
| Stock-based compensation | 1,794 | 1,668 | |||||||||
| Accrued employee compensation | 167 | 212 | |||||||||
| Capitalized research and development | 4 | 340 | |||||||||
| Other | 12 | - | |||||||||
| Sales tax accrual | 942 | 600 | |||||||||
| Net change in reserve accounts | 771 | 819 | |||||||||
| Gross deferred tax asset | 33,501 | 46,058 | |||||||||
| Valuation Allowance | (32,984) | (45,943) | |||||||||
| Net Deferred Tax Asset | 517 | 115 | |||||||||
| Deferred Tax Liabilities | |||||||||||
| Accrued miscellaneous | (2) | - | |||||||||
| Right-of-use asset | (84) | (95) | |||||||||
| Depreciation | (431) | - | |||||||||
| Reserve for credit losses | - | (20) | |||||||||
| Gross deferred tax liability | (517) | (115) | |||||||||
| Total | $ | - | $ | - | |||||||
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. In assessing the realization of deferred tax assets, management considers, whether it is “more likely than not”, that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible.
ASC 740 requires that a valuation allowance be established when it is “more likely than not” that all, or a portion of, deferred tax assets will not be realized. A review of all available positive and negative evidence needs to be considered, including the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. After consideration of all the information available, management believes that uncertainty exists with respect to future realization of its deferred tax assets and has, therefore, established a full valuation allowance as of December 31, 2025, and 2024.
Federal and state tax laws impose significant restrictions on the utilization of net operating loss carryforwards in the event of a change in ownership of the Company, as defined by Internal Revenue Code Section 382 (“Section 382”). The Company has completed a formal Section 382 analysis and determined a change in control occurred on October 18, 2024. The Company is subject to a federal Section 382 annual limitation of $4 million annually for the five years after the change in control, and a $1.3 million annual limitation thereafter. Deferred tax assets totaling $44.2 million are expected to expire unutilized and have been adjusted.
The Federal net operating loss carryforwards of approximately $27.6 million incurred from the years ended December 31, 2005, through December 31, 2017, will begin to expire in 2026. The Federal net operating loss carryforward for the years ended December 31, 2018, through 2025 of approximately $94.8 million will not expire. The state net operating loss carryforwards of approximately $46.2 million from years ending December 31, 2005, through December 31, 2025, will expire at various dates through 2043.
A provision of ASC 740 specifies that companies are to account for uncertainties in income tax reporting, and prescribes a methodology for recognizing, reversing, and measuring the tax benefits of a tax position taken, or expected to be taken, in a tax return. ASC 740 requires the evaluation of tax positions taken or expected to be taken while preparing the Company’s tax returns to determine whether the tax positions would “more-likely-than-not” be sustained if challenged by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Management has evaluated and concluded that there were no material uncertain tax positions requiring recognition in the Company’s consolidated financial statements as of December 31, 2025, and 2024. The Company does not expect any significant changes in the unrecognized tax benefits within twelve months of the reporting date.
The Company will recognize in income tax expense, interest and penalties related to income tax matters. For the years ended December 31, 2025, and 2024, the Company did not have any amounts recorded for interest and penalties.
The amount of cash income taxes paid by the Company were as follows:
| (In thousands) | For the year ended December 31, 2025 | ||||
| Federal | $ | - | |||
| State and local | |||||
| Texas | 25 | ||||
| All other states | 2 | ||||
| Foreign | - | ||||
| Total | $ | 27 | |||
The total cash income taxes paid by the Company during the year ended December 31, 2024 was $4 thousand.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 26, 2026 | Showing above |
| 2024 | Mar 20, 2025 | |
| 2023 | Mar 21, 2024 | |
| 2022 | Mar 31, 2023 | |
| 2021 | May 13, 2022 | |
| 2020 | Oct 21, 2021 | |
| 2019 | Mar 30, 2020 | |
| 2018 | Apr 1, 2019 | |
| 2015 | Mar 30, 2016 | |
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.