NOTE 12

INCOME TAXES

The components of loss before income tax expense by jurisdiction for continuing operations for the years ended December 31, consisted of the following (in thousands):

 SCHEDULE OF INCOME (LOSS) BEFORE INCOME TAX (BENEFIT) EXPENSE

The amount of income taxes paid (net of refunds) for continuing operations for the years ended December 31, consisted of the following (in thousands):

 SCHEDULE OF INCOME TAX PAID (NET OF REFUNDS)

The components of current and deferred federal, state and foreign income tax (benefit) expense for continuing operations for the years ended December 31, consisted of the following (in thousands):

 SCHEDULE OF COMPONENTS OF INCOME TAX (BENEFIT) EXPENSE

The Company’s U.S. federal statutory rate is 21%. The following table reconciles the Company’s U.S federal statutory rate of 21% to its effective tax rate from continuing operations for the years ended December 31, as follows (in thousands except for percentages):

 SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION

The Company records a valuation allowance against its net deferred tax asset to the extent it determines it is more likely than not that such asset will not be realized in the future. The Company regularly evaluates the probability that its deferred tax assets will be realized and determines whether valuation allowances or adjustments thereto are needed. This determination involves judgement and the use of estimates and assumptions, including expectations of future taxable income and tax planning strategies. The Company applies judgment to consider the relative impact of negative and positive evidence, and the weight given to negative and positive evidence is commensurate with the extent to which such evidence can be objectively verified. In 2024, based on the Company’s evaluation of all available positive and negative evidence, and with greater weight placed on the objectively verifiable evidence which primarily included the Company’s three-year cumulative losses, the Company determined that it is more likely than not that the Company’s net U.S. deferred tax asset will not be realized. As a result, the Company provided a full valuation allowance against its U.S. federal and state deferred tax assets and recorded an income tax expense in the amount of approximately $8,194,000. The Company continues to maintain a valuation allowance against foreign tax attributes that may not be realized.

The table below reflects components of the Company’s deferred tax asset balances for the years ended December 31, as follows: (in thousands):

 SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES

The Company has estimated net operating loss carryforwards (“NOLs”) for federal and state income tax purposes of approximately $46,470,000 and $94,925,000, respectively, as of December 31, 2025. Additionally, the Company has estimated NOLs for foreign income tax purposes of approximately $7,994,000 as of December 31, 2025. All of our NOLs can be carried forward and applied against future taxable income, if any, and expire in various amounts starting in 2026 with the exception of our federal NOLs which do not expire.

The Company accounts for uncertainties in income tax pursuant to ASC 740. A reconciliation of the beginning and ending amount of our unrecognized tax expense is summarized as follows (in thousands):

 SCHEDULE OF RECOGNIZED TAX EXPENSES

The Company does not include interest and penalties related to income taxes, including uncertain tax positions, within the provision for income taxes due to immateriality.

The tax years 2022 through 2024 remain open to examination by taxing authorities in the jurisdictions in which the Company operates.

The Company had $0 federal income tax payable for each of the years ended December 31, 2025, and 2025.

On July 4, 2025, the United States enacted the One Big Beautiful Bill Act (“OBBBA”) tax legislation. Included in this legislation are provisions that allow for the immediate expensing of domestic U.S. research and experimentation expenditures and software development costs (collectively, “R&E expenditures”), the permanent extension of 100% “bonus” depreciation for certain property, and the permanent restoration of the tax-basis EBITDA (earnings before interest, taxes and depreciation)-based limitation on the deductibility of business interest expense. The Company has reflected the estimated impact of the OBBBA on current and deferred income taxes in its Consolidated Balance Sheets.

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 amended Section 174 to eliminate current-year deductibility of R&E expenditures and instead require taxpayers to charge their R&E expenditures to a capital account amortized over five years (15 years for expenditures attributable to R&E activity performed outside the United States). For tax years 2022 to 2024, the Company has capitalized a total of $8,631,000 of R&E expenditures. The OBBBA enacted changes to no longer require capitalization of domestic R&E expenditures for tax years beginning after December 31, 2024. As such, the Company has no capitalized costs in 2025 and has elected to continue amortizing 2022 to 2024 capitalized expenditures over five years.