Vivos Therapeutics, Inc. Income Taxes Disclosure

NOTE 10 - INCOME TAXES

 

For the years ended December 31, 2024 and 2023, the domestic and foreign components of loss before income taxes consist of the following (in thousands):

 SCHEDULE OF LOSS BEFORE INCOME TAX

		2024				2023
Domestic		$	(11,194	)		$	(13,626	)
International			58				43
Loss before income taxes		$	(11,136	)		$	(13,583	)

 

 

For the years ended December 31, 2024 and 2023, we did not recognize any current or deferred income tax expense due to a valuation allowance against all of its net deferred income tax assets.

 

A reconciliation between the income tax benefit computed by applying the statutory U.S. federal income tax rate of 21% to the pre-tax loss, and the income tax benefit recognized in the consolidated financial statements is as follows for the years ended December 31, 2024 and 2023 (in thousands):

 SCHEDULE OF INCOME TAX EXPENSE (BENEFIT) DIFFERED FROM LOSS BEFORE INCOME TAXES

		2024				2023
Income tax benefit computed at federal statutory rate		$	2,351			$	2,852
Apportioned state income tax benefit			253				365
Other permanent differences			(121	)			(174	)
Prior year adjustment to state net operating loss carryforwards			(26	)			200
Non-qualified stock option cancellations			(63	)			(260	)
Other			(201	)			(86	)
Nontaxable gain on change in fair value of warrants, net of issuance costs			-				793
Change in valuation allowance			(2,193	)			(3,690	)
Total income tax benefit		$	-			$	-

 

As of December 31, 2024 and 2023, the principal components of deferred tax assets and liabilities were as follows (in thousands):

 SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES

		2024				2023
Deferred tax assets:
Net operating loss carryforwards			19,872				17,354
Stock based compensation			528				532
Lease liability			352				472
Property, equipment and intangibles			743				662
Other			282				649
Total deferred tax assets before valuation allowance			21,777				19,669
Valuation allowance			(21,522	)			(19,329	)
Total deferred income tax assets after valuation allowance			255				340
Deferred tax liabilities - ROU assets and other			(255	)			(340	)
Net deferred tax assets and liabilities		$	-			$	-

 

Management assesses the available positive and negative evidence to estimate if it is more likely than not that sufficient future taxable income will be generated to realize the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative net loss incurred since inception. Such objective evidence limits the ability to consider other subjective evidence such as our projections for future growth. On the basis of this evaluation, a valuation allowance of $20.4 million was recognized as of December 31, 2024. For the years ended December 31, 2024 and 2023, the valuation allowance increased by $1.1 million and $3.7 million, respectively.

 

As of December 31, 2024, we have federal net operating loss (“NOL”) carryforwards of $83.8 million. We also have various state NOL carry forwards. The determination of the state NOL carryforwards is dependent upon the apportionment percentages and state laws that can change from year to year and impact the amount of such carryforwards. If federal NOL carryforwards are not utilized, approximately $3.3 million will expire in 2036 and 2037. As of December 31, 2024, the remaining federal NOL carryforward of $80.5 million has no expiration date.

 

Federal and state laws impose substantial restrictions on the utilization of NOL carryforwards if we experience significant ownership changes as defined in Section 382 of the Internal Revenue Code (“IRC”). Pursuant to IRC Section 382, annual use of our NOL carryforwards may be limited in the event there is a cumulative change in ownership of more than 50% among 5% or greater shareholders (or shareholder groups) over any three-year period. We are not currently utilizing its federal and state NOL carryforwards and have not completed a formal study to determine if any past ownership changes may have triggered limitations under IRC Section 382. Our ability to use our remaining NOL carryforwards may be further limited if we experience an IRC Section 382 ownership change in connection with future changes in our stock ownership.

 

 

We do not believe there are any significant uncertain tax positions as of and for the years ended December 31, 2024 and 2023. Accordingly, no interest and penalties related to uncertain tax positions have been recognized for the years ended December 31, 2024 and 2023.

 

We file income tax returns in the United States federal and various state jurisdictions. We are no longer subject to income tax examinations for federal income taxes before 2021 or for states before 2020. Net operating loss carryforwards are subject to examination in the year they are utilized regardless of whether the tax year in which they are generated has been closed by statute. The amount subject to disallowance is limited to the NOL utilized. Accordingly, we may be subject to examination for prior NOL’s generated as such NOL’s are utilized. As of December 31, 2024, we have filed all appropriate foreign operation tax returns.