v3.25.4
Note 14 - Income Taxes
 12 Months Ended
Dec. 31, 2025
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

NOTE 14.     INCOME TAXES

 

The components of (loss) income before provision for income taxes are as follows:

 

  

Year Ended December 31,

 

(in thousands)

 

2025

  

2024

 

Domestic

 $(13,855) $(25,762)

Foreign

  3,020   2,455 

Net loss before taxes

 $(10,835) $(23,307)

 

Components of income tax expense are as follows:

 

  

December 31,

  

December 31,

 

(In thousands)

 

2025

  

2024

 

Current:

        

Federal

 $—  $— 

State

  23   24 

Foreign

  247   228 
   270   252 
         

Deferred:

        

Federal

  —   — 

State

  —   — 

Foreign

  —   — 
   —   — 

Total income tax expense

 $270  $252 

 

Below is a reconciliation of the statutory federal income tax rate to the Company's effective tax rate:

 

  

Year Ended December 31,

 
  

2025

  

2024

 
  

Amount

  

Percent

  

Amount

  

Percent

 

U.S. federal statutory tax rate

 $(2,275)  21.0% $(4,894)  21.0%

State and local income taxes, net of federal income tax effect and valuation allowance(i)

  18   (0.2)%  19   (0.1)%

Foreign tax effects:

                

Bulgaria:

                

Statutory tax rate difference

  (332)  3.1%  (270)  1.2%

Other

  (55)  0.5%  (17)  0.1%

Changes in federal valuation allowance

  1,262   (11.6)%  3,669   (15.8)%

Effect of cross-border tax laws:

                

GILTI

  608   (5.6)%  450   (1.9)%

Nontaxable or nondeductible items:

                

Stock compensation expense

  786   (7.3)%  787   (3.4)%

Section 162(m) compensation

  76   (0.7)%  273   (1.2)%

Other

  111   (1.0)%  211   (0.9)%

Other adjustments:

                

Other

  71   (0.7)%  24   (0.1)%

Total

 $270   (2.5)% $252   (1.1)%

 

(i) The states that contribute to the majority (greater than 50%) of the tax effect in this category includes Florida and California for each of the years ended December 31, 2025 and 2024.

 

Major components of the Company’s deferred tax assets (liabilities) are as follows:

 

  

December 31,

  

December 31,

 

(In thousands)

 

2025

  

2024

 

Deferred tax assets:

        

Loss and credit carryforwards

 $13,586  $12,126 

Stock-based compensation

  1,927   2,524 

Research and development capitalization

  2,418   2,890 

Lease liabilities

  1,066   1,153 

Accrued insurance deductibles

  499   653 

Interest expense limitation

  2,398   1,429 

Accrued bonuses

  441   — 

Deferred revenue

  235   310 

Inventory 263A adjustment

  147   157 

Other

  716   814 

Total deferred tax assets

  23,433   22,056 

Valuation allowance

  (22,126)  (20,697)

Total deferred tax assets, net of valuation allowance

  1,307   1,359 

Deferred tax liabilities:

        

Lease right-of-use assets

  (1,007)  (1,116)

Property and equipment

  (180)  (134)

Other

  (120)  (109)

Total deferred tax liabilities

  (1,307)  (1,359)

Net deferred tax assets

 $—  $— 

 

The Company considers all positive and negative evidence regarding the realization of deferred tax assets, including past operating results and future sources of taxable income. For the years ended December 31, 2025 and 2024, the valuation allowance increased by $1.4 million and $4.3 million, respectively. The $22.1 million valuation allowance at December 31, 2025 is related to Federal and State deferred tax assets the Company believes are not more likely than not to be realized.

 

 

At December 31, 2025 the Company had federal net operating loss carryforwards of approximately $44.3 million which will be carried forward indefinitely and may be used to offset up to 80% of federal taxable income.  In addition, the Company has state net operating loss carryforwards of approximately $79.9 million. Approximately $36.9 million will begin to expire in 2029 and the remainder will be carried forward indefinitely.  Additionally the Company has federal research and development carryforwards of approximately $0.3 million.

 

Cash taxes paid are as follows:

 

  

Year Ended December 31,

 

(in thousands)

 

2025

  

2024

 

Federal

 $—  $— 

State

  19   26 

Foreign:

        

Bulgaria

  239   356 

Total foreign

  239   356 

Taxes paid

 $258  $382 

 

In 2025, the individual jurisdiction with cash taxes paid that equaled or exceeded 5% of total income taxes paid was Bulgaria and Texas. In 2024, the individual jurisdiction with cash taxes paid that equaled or exceeded 5% of total income taxes paid was Bulgaria. 

 

On July 4, 2025 changes to U.S. tax law were enacted. The provisions allow for the immediate expensing of domestic research and experimentation costs, 100% accelerated bonus depreciation on eligible capital expenditures, and other tax law changes impacting 2025 with other changes impacting the Company and being effective in 2026. The impacts of these changes are included in our results for the year ended December 31, 2025.

 

The Company considers the earnings of Apyx Bulgaria, EOOD to be indefinitely invested outside the United States on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and our specific plans for reinvestment of those subsidiary earnings. It has not recorded a deferred tax liability related to the U.S. Federal and State income taxes and foreign withholding taxes on the undistributed earnings of Apyx Bulgaria, EOOD indefinitely invested outside the United States. If it decides to repatriate the foreign earnings, the Company will need to adjust its income tax provision in the period it determines that the earnings will no longer be indefinitely invested outside the United States. 

 

The Company assesses the financial statement impact of an uncertain tax position taken or expected to be taken on an income tax return at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized in the financial statements unless it is more likely than not of being sustained. As of December 31, 2025 and 2024, the Company has no uncertain tax positions.

 

The Company is subject to U.S. federal and state income tax examination. The Company’s 2022 through 2024 U.S. federal income tax returns are subject to examination by the Internal Revenue Service. The Company’s state income tax returns are subject to examination for the 2021 through 2024 tax years.