Theriva Biologics, Inc. Income Taxes Disclosure

13. Income Taxes

Effective January 1, 2025, we adopted the new income tax disclosure standard (Income Taxes (Topic 740): Improvements to Income Tax Disclosures) on a prospective basis. Accordingly, the tables presenting our income tax provision and effective tax rate reconciliation will reflect the new standard for 2025, while the 2024 disclosures will continue to follow the previous disclosure requirements.

Losses before income taxes for the years ended December 31, 2025 and 2024 was as follows:

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The components of income tax benefit consisted of the following for the years ended December 31, 2024 and 2023:

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13. Income Taxes – (continued)

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Income tax provision (benefit) related to continuing operations differ from the amounts computed by applying the statutory income tax rate of 21% to pretax loss as follows (in thousands):

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13. Income Taxes – (continued)

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Deferred Tax Assets and Liabilities

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Deferred income taxes reflect the net tax effects of loss and credit carry forwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets for federal and state income taxes are as follows (in thousands):

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On March 10, 2022, the Company acquired VCN, a Spanish Company in a tax-free stock acquisition. Due to this acquisition, VCN is a wholly owned subsidiary of the company. As a result of the acquisition, a deferred tax liability was established with purchase accounting related to acquired In Process Research and Development. A deferred tax asset was also established with purchase accounting related to VCN’s unlimited life net operating loss carryover. During 2024, for book purposes, IPR&D and Goodwill assets were both impaired, with Goodwill written down to zero and IPR&D written down to $17.4 million. The impairment to Goodwill represents a permanent difference and the impairment to IPR&D represents a reduction in the deferred tax liability established with the Company’s VCN acquisition.

At December 31, 2025, the Company has a gross Federal net operating loss carry-forward of approximately $1.5 million available to offset future United States taxable income. In 2024 and 2025, it was determined that availability of gross Federal net operating losses of $76.7 million and $1.8 million respectfully were fully limited as well as $7.4 million of current 2025 net operating losses as a result of change of ownership that occurred in 2025 under Section 382 of the Internal Revenue Code. State Net Operating Losses are also limited by Section 382 of the Internal Revenue Code and were limited accordingly. At December 31, 2024, the Company has a gross Foreign net operating loss carry forward of approximately $43.0 million USD. The foreign net operating loss carries forward indefinitely.

13. Income Taxes – (continued)

In 2020, the Company completed an Internal Revenue Code Section 382 analysis of its historical net operating loss carry-forward amount. As a result, the prior year net operating loss carry-forward was limited by $155.6 million. The decrease in the prior year net operating loss is attributable to control ownership changes which were determined for the years 2013 and 2018 which caused the reduction in the value of the historical net operating loss carry-forward amounts. Updated section 382 analysis were performed in 2021, 2022, 2023 and 2024 to identify if any additional ownership shifts occurred in these years. It was determined that an ownership shift occurred in January 2021 and in September 2024. The result of the updated Section 382 analysis produced an IRC 382 limit due to the 2021 and 2024 ownership changes. There was no ownership change determined for 2022 or 2023. In 2025 it was determined that all of the Company’s Federal and state Net Operating Loss carry forwards through 12/31/2024 as well as a portion of the current year 2025 loss were limited due to an updated 382 study performed in 2025.

As a result the of 2025 section 382 study, the Company’s does not have any pre-2018 net operating losses available for use in future tax years. In addition, all post 2017 net operating losses through 12/31/2024 are also not available due the section 382 study. $1.5 million of the net operating loss carry-forward originating in 2025 is not subject to additional limitations based on taxable income as of December 31, 2025.

The Company’s valuation allowance at December 31, 2025 was approximately $12.5 million. The net change in valuation allowance during the year ended December 31, 2025, was an increase of $1.2 million due to the following; $(.1) million federal and state net operating loss related to 382 limitation, an increase in foreign net operating loss of $3.4. offset by decreases in domestic and foreign deferred tax assets of $(1.2) and $(.9) million. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. As of December 31, 2025 and 2024, management has established a full valuation allowance against its net deferred tax assets in all US tax jurisdictions. The Company has also established a valuation allowance in its Spanish tax jurisdictions as it is no longer in a net deferred tax liability position in Spain.

As required under ASU 2023-09, the Company has included only the portion of the valuation allowance related to federal deferred tax assets in the “change in valuation allowance” line of the rate reconciliation. The following table presents a reconciliation of the total change in the valuation allowance (in thousands):

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Undistributed earnings of the Company’s foreign subsidiary, VCN, are considered to be permanently reinvested and, accordingly, no deferred U.S. income taxes have been provided thereon. Upon distribution of any earnings in the form of dividends or otherwise, those earnings would be subject to U.S. income tax. At the present time, VCN does not have any earnings and thus it is not necessary to estimate the amount of U.S. income taxes that might be payable if these earnings were repatriated.

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We have incurred net operating losses since inception, and we do not have any significant unrecognized tax benefits.