Tonix Pharmaceuticals Holding Corp. Income Taxes Disclosure

NOTE 18 – INCOME TAXES

 

Components of the net loss consist of the following (in thousands):

		Year ended December 31,
		2025				2024
Foreign		$	(89,988	)		$	(49,444	)
Domestic			(34,033	)			(80,592	)
Total		$	(124,021	)		$	(130,036	)

 

In 2025, the foreign losses are primarily comprised of $90.1 million related to the Irish operations. In 2024, the foreign losses are primarily comprised of $49.4 million related to the Irish operations and $0.09 million related to Canada operations of Tonix International Holding.

 

The Company adopted ASU 2023-09 and applied the new disclosure requirements prospectively for the year ended December 31, 2025. A reconciliation of the anticipated income tax benefit computed by applying the statutory federal income tax rate of 21% to loss before income taxes to the amount reported in the statement of operations and comprehensive loss after the adoption of ASU 2023-09 is as follows:

 

		Year Ended December 31,
		2025
		Amount				Percent
Tax at U.S. Statutory Rate			(26,044	)			21.0	%
State and Local Income Taxes, Net of Federal Income Tax Effect			—				0.0	%
Foreign Tax Effects
Ireland
Change in Foreign Valuation Allowance			11,261				-9.1	%
Statutory tax rate difference between Ireland and United States			7,657				-6.2	%
Other Foreign Jurisdiction			(32	)			0.0	%
Change in Domestic Valuation Allowance			5,056				-4.0	%
Nontaxable and Nondeductible items			456				0.4	%
Attributable reduction from control change			1,273				-1.0	%
Others			373				-0.3	%
Effective Tax Rate			—				0.0	%

 

A reconciliation of the effect of applying the federal statutory rate to the net loss and the effective income tax rate used to calculate the Company’s income tax provision is as follows:

		Year Ended December 31,
		2024				2023
Statutory federal income tax			(21.0	)%			(21.0	)%
Change in valuation allowance			14.4	%			11.7	%
Permanent differences			(1.0	)%			0.2	%
Foreign loss not subject to income tax			3.2	%			7.2	%
Attribute reduction from control change			4.3	%			0.9	%
Other			0.1	%			1.0	%
Income Tax Provision			0.0	%			0.0	%

 

Deferred tax assets (liabilities) and related valuation allowance as of December 31, 2025 and 2024 were as follows (in thousands):

 

		December 31,
		2025				2024
Deferred tax assets/(liabilities):
Net operating loss carryforward		$	55,377			$	39,255
Stock-based compensation			11,492				9,170
Fixed assets			9,254				9,617
Other			6,109				4,829
Total deferred assets			82,232				62,871
Valuation allowance			(82,232	)			(62,871	)
Net deferred tax assets		$	—			$	—

 

The Company has incurred research and development (“R&D”) expenses, a portion of which qualifies for tax credits. The Company conducted an R&D credit study to quantify the amount of credits and has claimed an R&D credit on its 2014-2017 tax returns. A portion of these R&D credit carryforwards are subject to annual limitations in their use in accordance with Internal Revenue Service Code ("IRC") section 383. The R&D credit carryforwards at December 31, 2024 were reduced to $0.0 million to reflect IRC section 383 ownership changes. There is no limitation currently on any R&D credits generated for 2025 under Sec 383.

In 2025, the Company completed an analysis under Section 382 of the Internal Revenue Code with respect to its net operating loss carryforwards. Based on this analysis, the Company determined that all historical loss carryforwards generated prior to December 31, 2024 are subject to limitation and effectively unavailable for use under Section 382. Net operating losses generated after December 31, 2024 are not subject to the Section 382 limitation.

As of December 31, 2025, the Company had net operating loss carryforwards consisting of $405.2 million of Irish NOLs, which may be carried forward indefinitely; $19.4 million of U.S. federal NOLs, may be carried forward indefinitely; and $9.3 million of state NOLs, which begin to expire in 2035.

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2025. Such objective evidence limits the ability to consider other subjective evidence such as our projections for future growth. As such, the Company has determined that it is not more likely than not that the deferred tax assets will be realized and accordingly, has provided a full valuation allowance against its gross deferred tax assets. The increase/(decrease) in the valuation allowance for the year ended December 31, 2025 was an increase of $19.4 million, and an increase of $17.4 million for the year ended December 31, 2024.

The Company recognizes interest accrued related to unrecognized tax benefits and penalties as income tax expense. However, as of December 31, 2025 there are no unrecognized tax benefits recorded. The Company is subject to taxation in the United States and various states and foreign jurisdictions. As of December 31, 2025, the Company's tax returns remain open and subject to examination by the tax authorities for the tax years 2022 and after.

The Company has not made payments or received refunds for income taxes for the years ended December 31, 2025 and 2024.

On July 4, 2025 the OBBBA was enacted into law. The legislation made several changes to the U.S. tax code, including the return of 100% bonus depreciation, the ability to immediately deduct domestic research and development costs, a more favorable rule for deducting interest expenses, and updated to international tax rules around global intangible low-taxed income and foreign-derived intangible income. The Company has evaluated the impact of the new tax provision and determined it to have an immaterial impact.