Vivos Therapeutics, Inc. Income Taxes Disclosure

NOTE 12 - INCOME TAXES

 

For the years ended December 31, 2025 and 2024, the domestic and foreign components of loss before income taxes consist of the following (in thousands):

SCHEDULE OF LOSS BEFORE INCOME TAX 

		2025				2024
Domestic		$	(21,230	)		$	(11,194	)
Canada			-				58
Loss before income taxes		$	(21,230	)		$	(11,136	)

 

For the years ended December 31, 2025 and 2024, we did not recognize any current or deferred income tax expense due to a valuation allowance against all of our net deferred income tax assets. Accordingly, we did not make any cash payments for income taxes for the years ended December 31, 2025 and 2024. A reconciliation between the income tax benefit computed by applying the statutory U.S. federal income tax rate of 21% to the pre-tax domestic loss before income taxes, and the income tax benefit (expense) recognized in the consolidated financial statements is as follows for the years ended December 31, 2025 and 2024 (in thousands):

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

		2025								2024
		Amount				Percent				Amount				Percent
U.S. Federal statutory tax rate		$	4,459				21.0	%		$	2,351				21.0	%
Domestic state income taxes, net of Federal income tax effect (1)			639				3.0	%			253				2.3	%
Reductions in domestic state net operating loss carryforwards:
Changes in apportionment and other			(169	)			-0.8	%			(26	)			-0.2	%
Increase in valuation allowance			(470	)			-2.2	%			(227	)			-2.0	%
Non-qualified stock option cancellations			(327	)			-1.5	%			(56	)			-0.5	%
Non-deductible items			(144	)			-0.7	%			(121	)			-1.1	%
Other			140				0.7	%			(208	)			-1.9	%
Increase in U.S. Federal valuation allowance			(4,128	)			-19.4	%			(1,966	)			-17.6	%
U.S. Federal tax rate		$	-				0.0	%		$	-				0.0	%

 

(1)

For the year ended December 31, 2024, approximately 73% of the Federal net operating loss was apportioned to 12 domestic state income tax returns whereby the weighted average state income tax rate was approximately 5.2%. Colorado and California comprise the majority of the tax effects in this category.

 

 

As of December 31, 2025 and 2024, the principal components of deferred income tax assets and liabilities were as follows (in thousands):

SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES 

		2025				2024
Deferred tax assets:
Net operating loss carryforwards:
U.S. Federal		$	21,966			$	17,598
Domestic rates			2,734				2,274
Lease liability			1,133				352
Intangible assets			530				673
Accrued liabilities			368				184
Stock based compensation			297				528
Property and equipment			111				70
Other			95				98
Total deferred tax assets after valuation allowances			27,234				21,777
Valuation allowances			(26,120	)			(21,522	)
Total deferred tax assets after valuation allowances			1,114				255
Deferred tax liabilities:
ROU assets			(1,045	)			(240	)
Goodwill and other			(69	)			(15	)
Total deferred tax liabilities			(1,114	)			(255	)
Net deferred tax assets and liabilities		$	-			$	-

 

We assess the available positive and negative evidence to determine if it is more likely than not that sufficient future taxable income will be generated to realize the existing deferred income tax assets. A significant piece of objective negative evidence is the cumulative net losses incurred since our 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, valuation allowances of $26.1 million and $20.4 million were recognized as of December 31, 2025 and 2024, respectively. For the years ended December 31, 2025 and 2024, the valuation allowances increased by $4.6 million and $1.1 million, respectively.

 

As of December 31, 2025, we have federal net operating loss (“NOL”) carryforwards of $104.6 million. We also estimate that various state NOL carryforwards are available for an aggregate of approximately $66.5 million as of December 31, 2025. 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, a total of $3.3 million will expire in 2036 and 2037. As of December 31, 2025, the remaining federal NOL carryforwards of $101.3 million have 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 our 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. The 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 don’t have any significant uncertain tax positions as of and for the years ended December 31, 2025 and 2024. Accordingly, no interest and penalties related to uncertain tax positions have been recognized in the accompanying consolidated financial statements.

 

We file income tax returns in the U.S. Federal and various state jurisdictions. We are no longer subject to income tax examinations for Federal income taxes before 2022 or for domestic states before 2021. NOL 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.

 

 

In July 2025, the One Big Beautiful Bill Act (the “OBBB”) was signed into law. Among other things, OBBB permits immediate expensing of domestic research and experimental (“R&E”) costs, modifies the international tax framework, and restores 100% bonus depreciation for certain qualified property. The most significant impact of OBBB for us was that we no longer intend to capitalize R&E costs for 2025 and we plan to continue amortizing R&E costs that were capitalized in prior years. We recognized the effects of OBBB in 2025 which did not have any impact on our annual U.S. Federal effective tax rate.