Beyond Air, Inc. Income Taxes Disclosure

NOTE 12 INCOME TAXES

 

As of March 31, 2025, the Company has approximately $159.9 million, $28.9 million, $6.3 million and $3.1 million of net operating losses (“NOL”) carryforwards for U.S. federal, Israeli, Irish and Cypriot tax purposes, respectively. The U.S. federal NOL carryforwards of approximately $1.4 million, which were generated prior to March 2018 expire starting in 2035 through 2037. The NOL of approximately $158.5 million can be carried forward indefinitely but limited to offset 80% of taxable income. The entire NOL for Israel, Ireland and Australia can be carried forward indefinitely. The Company also has state NOL carryforwards in the amount of approximately $87.7 million expiring during the years from 2036 to 2043. The Tax Cuts and Jobs Act of 2017 (“TCJA”) has modified the Internal Revenue Code (“IRC”) 174 expenses related to research and development for tax years beginning after December 31, 2021. Under the TCJA, the Company must now capitalize the expenditures related to research and development activities and amortize over five years for U.S. activities and 15 years for non-U.S. activities using a mid-year convention. Therefore, the capitalization of research and development costs in accordance with IRC 174 resulted in a gross deferred tax asset of $34.0 million.

 

The Company also has R&D tax credits of $2.9 million expiring during the years from 2038 to 2042. The Company has not, as yet, conducted a study of R&D credit carryforwards. This study may result in an adjustment to the Company’s R&D credit carryforwards. We assessed our uncertain tax positions and determined that a 25% reserve on our federal research and development credit is appropriate and in line with industry standards. As of March 31, 2025, the total amount of unrecognized tax benefits was $0.7 million, exclusive of interest and penalties. A full valuation allowance has been provided against the Company’s R&D credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance. Thus, there would be no impact to the consolidated balance sheets and the consolidated statements of operations and comprehensive loss if an adjustment were required. No estimated interest or penalties related to unrecognized tax benefits have been recorded as of March 31, 2025.

 

Pursuant to Section 382 of the Internal Revenue Code, changes in the Company’s ownership may limit the amount of its NOL carryforwards that could be utilized annually to offset future taxable income, if any. This limitation would generally apply in the event of a cumulative change in ownership of the Company of more than 50% within a three-year period. The Company has performed a study as of March 31, 2021 and determined that on or around February 15, 2017 and February 15, 2020 ownership changes for purposes of Section 382 have occurred. The annual limitations caused by these prior ownership changes will no longer impact the utilizations of NOL’s after March 31, 2022. The Company has not updated the study since March 31, 2021 and therefore has not determined if any other NOL limitations exist.

 

The components of net loss before the provision for income taxes are as follows (in thousands):

 

SCHEDULE OF PROFIT (LOSS) BEFORE TAXES

		For the Year Ended March 31, 2025				For the Year Ended March 31, 2024
Domestic		$	(42,186	)		$	(54,757	)
Foreign			(6,293	)			(9,538	)
Total		$	(48,479	)		$	(64,295	)

 

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets were as follows (in thousands):

 SCHEDULE OF DEFERRED TAX ASSET/LIABILITY

		March 31, 2025				March 31, 2024
Net operating loss carryforwards		$	48,702			$	40,263
Research and development tax credits			2,197				2,140
Research and development tax credit capitalization			8,066				5,713
Other			(15	)			12
Depreciation			(2,337	)			(1,924	)
Stock-based compensation			7,556				10,327
Capital loss carryforward			-				1,401
Reserves and accruals			36				1,200
Right-of-use asset			(298	)			(376	)
Lease liability			333				413
Net deferred tax			64,240				59,169
Valuation allowance			(64,240	)			(59,169	)
Net deferred tax asset		$	-			$	-

 

A reconciliation of income tax expense calculated at the federal enacted statutory rate of 21% is as follows:

 SCHEDULE OF STATUTORY US FEDERAL EFFECTIVE RATE

		March 31, 2025				March 31, 2024
Federal income tax at statutory rate			(21.00	)%			(21.00	)%
State income tax, net of federal benefit			(2.73	)			(2.51	)
Permanent items			(0.58	)			(0.05	)
Non-deductible compensation			10.45				0.00
Change in valuation allowance			10.46				22.51
Research and development tax credits			(0.12	)			(0.80	)
Foreign tax rate differential			0.65				0.08
Other			2.87				1.77
Change to foreign NOL’s			0.00				0.00
Effective income tax expense rate			0.00	%			0.00	%

 

Inflation Reduction Act

 

On August 16, 2022, the Inflation Reduction Act of 2022 (the “Act”) was signed into law. The Act includes a new 15% corporate minimum tax and a 1% excise tax on the value of corporate stock repurchases, net of new share issuances, after December 31, 2022. These provisions did not have a material impact on the Company’s consolidated financial position as of March 31, 2025.

 

 

BEYOND AIR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS