v3.25.4
Note 9 - Income Taxes
 12 Months Ended
Dec. 31, 2025
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

9. Income Taxes:

 

Income (loss) Before Taxes by Jurisdiction

 

Income (loss) before taxes by tax jurisdiction for the years ended  December 31, 2025,  December 31, 2024 and  December 31, 2023, consisted of the following (Dollar amounts in thousands of U.S. dollars):

 

  

Year ended December 31,

 
  

2025

  

2024

  

2023

 

United States

 $(97,552) $(119,526) $(121,527)

Canada

  27,555   16,511   17,567 

Other

  2,687   1,141   890 
  $(67,310)  (101,874)  (103,070)

 

Income Tax Expense (Recovery) by Jurisdiction

 

Income tax expense (recovery) by tax jurisdiction for the years ended  December 31, 2025,  December 31, 2024 and  December 31, 2023, consisted of the following (Dollar amounts in thousands of U.S. dollars):

 

  

Year ended December 31,

 
  

2025

  

2024

  

2023

 

Current income tax expense (recovery):

            

Federal

 $952  $649  $829 

State

  224   485   336 

Canada

  6,528   5,196   4,377 

Other

  1,094   802   625 
   8,798   7,132   6,167 
             

Deferred income tax expense (recovery):

            

Federal

  (8)  1,443   (8,368)

State

  21   168   (4,006)

Canada

  147   (323)  (172)

Other

  (449)  (434)  (494)
   (289)  854   (13,040)

Income tax expense (recovery)

 $8,509  $7,986  $(6,873)

 

The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate of 21% to income before income taxes for the years ended  December 31, 2025,  December 31, 2024 and  December 31, 2023, as a result of the following (Dollar amounts in thousands of U.S. dollars): 

 

  

Year ended December 31,

 
  

2025

  

2024

  

2023

 
  

Amount

  

Percent

  

Amount

  

Percent

  

Amount

  

Percent

 
                         

Income (loss) for the year before income taxes

 $(67,310)     $(101,874)     $(103,070)    

U.S. federal statutory tax rate

  (14,135)  21.0%  (21,394)  21.0%  (21,644)  21.0%
                         

State and local income taxes, net of federal income tax effect(1)

  287   (0.4%)  251   (0.2%)  (837)  0.8%

Foreign tax effects

  -   0.0%  -   0.0%  -   0.0%

Canada

  6,580   (9.8%)  5,678   (5.6%)  5,033   (4.9%)

Other foreign jurisdiction

  557   (0.8%)  257   (0.3%)  99   (0.1%)

Effect of changes in tax laws or rates enacted in the current period

  -   0.0%  -   0.0%  -   0.0%

Effect of cross-border tax laws

  (1,752)  2.6%  (1,301)  1.3%  (1,558)  1.5%

Tax credits

  -   0.0%  -   0.0%  -   0.0%

Changes in valuation allowances

  13,924   (20.7%)  19,558   (19.2%)  8,632   (8.4%)

Nontaxable or nondeductible items

  -   0.0%  -   0.0%  -   0.0%

Changes in unrecognized tax benefits

  573   (0.9%)  -   0.0%  -   0.0%

Other adjustments

  2,475   (3.7%)  4,937   (4.8%)  3,402   (3.3%)

Effective tax rate

 $8,509   (12.7%) $7,986   (7.8%) $(6,873)  7.0%

 

(1) In 2025, state and local taxes in North Carolina made up the majority of the tax effect in this category.

 

Our effective tax rate is impacted by an increase in valuation allowances on net operating losses and interest expense limitations that we are not expected to realize in future years, and the tax owing on foreign earnings.

 

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

 

  

December 31, 2025

  

December 31, 2024

 

Deferred tax assets:

        

Net operating losses

 $74,093  $71,429 

Foreign tax credits

  12,534   12,534 

Share based compensation

  7,035   6,093 

Contract liabilities

  5,129   5,086 

Interest expense limitation

  16,022   10,723 

Limited life intangible assets

  

3,226

   

629

 

Fixed assets

  -   - 

Accruals, including foreign exchange and other

  1,568   1,442 

Total deferred tax assets

  119,607   107,936 

Valuation allowance

  (68,144)  (51,653)

Total deferred tax assets, net

 $51,463  $56,283 

Deferred tax liabilities:

        

Investment in partnership

 $(28,853) $(33,436)

Prepaid registry fees and expenses

  (19,115)  (20,640)

Indefinite life intangible assets

  (2,962)  (2,965)

Fixed assets

  (3,495)  (2,205)

Limited life intangible assets

  -   - 

Foreign branch deferred tax liabilities

  -   - 

Total deferred tax liabilities

 $(54,425) $(59,246)
         

Net deferred tax liabilities

 $(2,962) $(2,963)

 

In assessing the need for a valuation allowance, historical and future levels of income, expectations, and risks associated with estimates of future taxable income and tax planning strategies are considered. In 2025, we believe that it is more likely than not that the tax benefit from deferred tax assets will not be realized. As of December 31, 2025, a valuation allowance of $68.1 million is recorded against net deferred tax assets. The increase in the valuation allowance was primarily attributable to an increase in deferred tax assets resulting from net operating losses and interest expense limitations.

 

As of December 31, 2025, the Company had net federal and state operating loss carryforwards of approximately $306.7 million and interest expense carryforwards of $66.1 million. The majority of the net operating loss and interest expense carryforwards can be carried forward indefinitely. 

 

As of December 31, 2025, the Company had foreign tax credit carryforwards of $12.5 million. Foreign tax credits will start to expire beginning in the year ending December 31, 2027 if not otherwise utilized.

 

The Company had $0.1 million total gross unrecognized tax benefits as of December 31, 2025 and nil total gross unrecognized tax benefits as of December 31, 2024.

 

The Company recognizes interest and penalties related to income tax matters within the provision for income taxes. As of December 31, 2025, the Company recorded $0.8 million of interest in income taxes, primarily due to Internal Revenue Code Sec. 453A interest on deferred tax liability for U.S. tax purposes. No other material interest and penalties were recognized as of December 31, 2025.

 

Income Taxes Paid by Jurisdiction

 

  

Year ended December 31,

 
  

2025

  

2024

  

2023

 

United States

 $739  $735  $580 

State

  170   (234)  (903)

Canada

  4,004   6,158   4,797 

Denmark

  518   679   (86)

Germany

  93   315   541 

Other foreign

  127   -   - 
  $5,651   7,653   4,929