v3.25.4
INCOME TAXES
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES

NOTE 10 – INCOME TAXES

For the years ended December 31, 2025 and 2024, income from continuing operations before taxes consisted of amounts related to U.S. operations and income associated with the Company’s foreign operations. The geographical breakdown of the Company’s income (loss) from continuing operations before income tax expense (benefit) was as follows (in thousands):

 

 

Year Ended December 31,

 

 

2025

 

 

2024

 

Domestic

 

$

988

 

 

$

1,274

 

International

 

 

(3,844

)

 

 

1,710

 

Income (loss) before income tax expense

 

$

(2,856

)

 

$

2,984

 

 

Income tax expense (benefit) consists of (in thousands):

 

 

Year Ended December 31,

 

 

2025

 

 

2024

 

Current tax expense:

 

 

 

 

 

 

Federal

 

$

(268

)

 

$

1,271

 

Foreign

 

 

282

 

 

 

(1,107

)

State

 

 

366

 

 

 

584

 

Total current

 

 

380

 

 

 

748

 

Deferred tax expense (benefit):

 

 

 

 

 

 

Federal

 

 

(617

)

 

 

(1,078

)

Foreign

 

 

1,101

 

 

 

480

 

State

 

 

41

 

 

 

(180

)

Total deferred tax expense:

 

 

525

 

 

 

(778

)

Total income tax expense (benefit)

 

$

905

 

 

$

(30

)

 

Tax rate reconciliation

 

The following table presents a reconciliation of the federal statutory rate to the Company’s effective tax rate:

 

 

Year Ended December 31, 2025

 

 

Amount

 

 

%

 

US Federal Statutory Income Tax Rate

 

$

(600

)

 

 

21.0

%

State income taxes, net of federal effect(1)

 

 

334

 

 

 

-11.7

%

Tax credits

 

 

 

 

 

 

Research credits

 

 

(784

)

 

 

27.5

%

Nontaxable and nondeductible Items, net

 

 

 

 

 

 

Meals & Entertainment

 

 

133

 

 

 

-4.7

%

Transaction Costs

 

 

210

 

 

 

-7.4

%

Foreign Taxes

 

 

(78

)

 

 

2.7

%

Capital Gain

 

 

876

 

 

 

-30.7

%

Stock Comp (Windfall)

 

 

41

 

 

 

-1.4

%

367a Gain

 

 

63

 

 

 

-2.2

%

Goodwill Impairment

 

 

191

 

 

 

-6.7

%

Other Nontaxable and non-deductible items

 

 

10

 

 

 

-0.4

%

Return to provision and other true ups

 

 

(1,674

)

 

 

58.6

%

Other

 

 

(2

)

 

 

0.1

%

Foreign tax effects

 

 

 

 

 

 

Canada

 

 

 

 

 

 

Rate differential

 

 

32

 

 

 

-1.1

%

Payable true up

 

 

362

 

 

 

-12.7

%

Other

 

 

2

 

 

 

-0.1

%

Withholding

 

 

914

 

 

 

-32.0

%

Future withholding

 

 

(183

)

 

 

6.4

%

Germany

 

 

 

 

 

 

Rate differential

 

 

(10

)

 

 

0.4

%

Trade tax

 

 

81

 

 

 

-2.8

%

Netherlands

 

 

 

 

 

 

Rate differential

 

 

(27

)

 

 

0.9

%

Other

 

 

(81

)

 

 

2.8

%

United Kingdom

 

 

 

 

 

 

Rate differential

 

 

(196

)

 

 

6.9

%

Nontaxable and nondeductible Items, net

 

 

 

 

 

 

Patent Box Deduction

 

 

(78

)

 

 

2.7

%

Other

 

 

7

 

 

 

-0.2

%

Research credits

 

 

(16

)

 

 

0.6

%

Change in valuation allowance

 

 

1,299

 

 

 

-45.5

%

Other

 

 

15

 

 

 

-0.5

%

Kuwait

 

 

 

 

 

 

Branch income tax

 

 

64

 

 

 

-2.2

%

Effective tax rate

 

$

905

 

 

 

-31.7

%

 

(1) State taxes in Texas represented the majority (greater than 50 percent) of the tax effect in this category.

 

The following table presents a reconciliation of the federal statutory rate to the Company’s effective tax rate in accordance with the guidance prior to the adoption of ASU 2023-09, Improvements to Income Tax Disclosure:

 

 

December 31,

 

 

2024

 

U.S. federal tax benefit at statutory rate

 

 

21.0

%

State taxes, net of federal benefit

 

 

12.7

%

Permanent differences

 

 

22.7

%

Permanent differences related to foreign items

 

 

-5.8

%

Transfer pricing

 

 

1.2

%

Foreign rate differential

 

 

1.4

%

Foreign taxes

 

 

-10.4

%

Valuation allowance

 

 

-0.3

%

Credits

 

 

-12.1

%

Income taxes deferred adjustment

 

 

27.0

%

Income taxes payable adjustment

 

 

-58.8

%

Other

 

 

0.4

%

Effective tax rate

 

 

-1.0

%

 

Income taxes paid (net of refunds)

 

The following table presents income taxes paid for the years ended December 31, 2025 and 2024 (in thousands):

 

 

Year Ended December 31,

 

 

2025

 

 

2024

 

Income taxes paid (net of refunds):

 

 

 

 

 

 

Federal

 

$

—

 

 

$

2,663

 

State:

 

 

 

 

 

 

New Mexico

 

 

—

 

 

 

175

 

Texas

 

 

495

 

 

 

435

 

Louisiana

 

 

70

 

 

 

22

 

Other

 

 

62

 

 

 

90

 

Total State

 

 

627

 

 

 

722

 

Foreign

 

 

 

 

 

 

Canada

 

 

797

 

 

 

—

 

Total cash paid for income tax

 

$

1,424

 

 

$

3,385

 

 

Significant components of deferred taxes

 

The tax effects of temporary differences and carryforwards that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2025 and 2024 are presented below (in thousands):

 

 

Year Ended December 31,

 

 

2025

 

 

2024

 

Deferred tax assets

 

 

 

 

 

 

Net operating loss carryforward

 

$

8,213

 

 

$

3,488

 

Allowance for credit losses

 

 

296

 

 

 

321

 

Share-based compensation

 

 

2,262

 

 

 

1,800

 

Bonus accrual

 

 

151

 

 

 

70

 

Inventory

 

 

200

 

 

 

220

 

Intangible assets

 

 

—

 

 

 

1,815

 

Federal credits

 

 

784

 

 

 

3,252

 

Other

 

 

6,073

 

 

 

2,681

 

Gross deferred tax assets

 

 

17,979

 

 

 

13,647

 

Valuation allowance

 

 

(4,228

)

 

 

(3,019

)

Net deferred tax assets

 

 

13,751

 

 

 

10,628

 

Deferred tax liabilities

 

 

 

 

 

 

Depreciation on property, plant, and equipment

 

 

(10,750

)

 

 

(10,902

)

Withholding tax on unremitted earnings

 

 

(247

)

 

 

(431

)

Intangible assets

 

 

(4,277

)

 

 

—

 

Other

 

 

(5,643

)

 

 

(5,221

)

Deferred tax liabilities

 

 

(20,917

)

 

 

(16,554

)

Net deferred liabilities

 

$

(7,167

)

 

$

(5,926

)

 

At December 31, 2025 and 2024, the Company had federal net operating loss carryforwards of approximately $2.8 million and nil, respectively, which may be carried forward indefinitely and state and local net operating loss carryforwards of approximately $0.6 million and $7.0 million, respectively, which expire at various dates.

 

The utilization of the Company’s net operating losses may be subject to a limitation due to the “change in ownership provisions” under Section 382 of the Internal Revenue Code and similar state and foreign provisions. Such limitations may result in the expiration of the net operating loss carryforwards before their utilization.

 

The Company is subject to income taxes in the U.S. federal jurisdiction, various state jurisdictions as well as Canada. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. The Company’s tax years remain open for examination by all tax authorities since inception and carryover attributes remain open to adjustment by the U.S. and state authorities.

 

On July 4th, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The Company incorporated these provisions effective during the quarter, and they had no material impact on our consolidated financial statements for the year ended December 31, 2025.