16.      INCOME TAXES

The Company is subject to U.S. federal tax rate of 21%. The Company’s subsidiaries in mainland China are subject to an income tax rate of 25%, the subsidiary in Hong Kong is subject to an income tax rate of 8.25%.

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For financial reporting purposes, loss before income taxes and share of net loss in an equity investee, includes the following components:

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Significant components of the Company’s deferred income tax assets and liabilities as of December 31, 2025 and 2024 are as follows:

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The Company has U.S. federal and state net operating loss (NOL) carryforwards of $183.6 million at December 31, 2025. Federal and certain state NOLs generated after 2018, have indefinite lives. Certain NOLs generated prior to 2020 begin to expire in years 2025 through 2039. The Company also has mainland China NOLs carryforward of $62.6 million at December 31, 2025 that begin to expire in years 2026 through 2030. The Company also has Hong Kong NOLs carryforward of $4.7 million at December 31, 2025 that have indefinite lives. The Company also has research and experimentation (“R&E”) tax credit carryforwards of $1.2 million as of December 31, 2025 that begin to expire in years 2026 through 2041. Unused R&E tax credit carryforwards expire after a period of 20 years.

Under the provisions of the US Internal Revenue Code, the NOL and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. NOL and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code of 1986, respectively, as well as similar state tax provisions. This could limit the amount of tax attributes that the Company can utilize annually to offset future taxable income or tax liabilities. The amount of the annual limitation, if any, will be determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. For financial reporting purposes, a

100% valuation allowance has been recognized to reduce the net deferred tax assets to zero because it is more likely than not that the Company could not generate sufficient taxable income in the future to realize the benefit of deferred income tax assets.

A reconciliation of the provision for income taxes to the federal statutory rate is as follows. The reconciliation for 2025 is in accordance with the updated requirements of ASU No. 2023-09.

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Change in valuation allowance is as follows:

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A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:

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The Company had $0.5 million of unrecognized tax benefits as of December 31, 2025 related to net R&E tax credit. For the year ended December 31, 2025, there was a net reduction of unrecognized tax benefits of $78,000 related to R&E tax credits. The Company has a full valuation allowance at December 31, 2025 and 2024 against the full amount of its net deferred tax assets and, therefore, there was no impact on the Company’s financial position. The Company does not expect significant changes to the unrecognized benefit. As of December 31, 2025, 2024, and 2023, the Company did not accrue any interest related to uncertain tax positions, as none of the relevant tax benefits has been realized. To date, there have been no interest or penalties charged to the Company related to income taxes.

The Company and each of its PRC subsidiaries file income tax returns in the United States and the PRC, respectively. Due to the existence of tax attribute carryforwards (which are currently offset by a full valuation allowance), all of the Company’s tax returns since 2005 are open to examination by the taxing authorities. According to the PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of taxes is due to computational errors made by the taxpayer or the withholding agent. The statute of limitations is extended to five years under special circumstances where the underpayment of taxes is more than RMB100,000 ($15,000). In the case of transfer pricing issues, the statute of limitations is ten years. There is no statute of limitations in the case of tax evasion. In the US, the Company is no longer subject to income tax examinations by authorities for years ended on or before December 31, 2021 except for certain states where the open periods are one year longer.