Edible Garden AG Inc Income Taxes Disclosure
NOTE 12 – INCOME TAX EXPENSE
The components of deferred income tax assets and (liabilities) are as follows:
|
| (in thousands) |
| |||||
|
| December 31, |
|
| December 31, |
| ||
|
| 2025 |
|
| 2024 |
| ||
Deferred tax assets: |
|
|
|
|
|
| ||
Net operating losses |
| $ | 18,887 |
|
| $ | 12,268 |
|
Accrued expenses |
|
| 30 |
|
|
| 40 |
|
Leases |
|
| 182 |
|
|
|
|
|
Reserves & Allowances |
|
| 124 |
|
|
| 61 |
|
Gross deferred tax assets |
|
| 19,223 |
|
|
| 12,369 |
|
|
|
|
|
|
|
|
|
|
Valuation allowance |
|
| (17,310 | ) |
|
| (12,140 | ) |
|
|
|
|
|
|
|
|
|
Total deferred tax assets |
|
| 1,913 |
|
|
| 229 |
|
|
|
|
|
|
|
|
|
|
Deferred tax Liabilities: |
|
|
|
|
|
|
|
|
Depreciable asset basis differences |
|
| (1,913 | ) |
|
| (229 | ) |
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities |
|
| (1,913 | ) |
|
| (229 | ) |
|
|
|
|
|
|
|
|
|
Net deferred tax assets (liabilities) |
| $ | - |
|
| $ | - |
|
The Company did not incur income tax expense or benefit for the years ended December 31, 2025 or 2024. The reconciliation between the Company’s effective tax rate and the statutory tax rate is as follows:
|
| Years Ended |
| |||||||||||||
|
| December 31, 2025 |
|
| December 31, 2024 |
| ||||||||||
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| ||||
Expected income tax benefit at statutory tax rate, net |
| $ | (3,639 | ) |
|
| -21.00 | % |
| $ | (2,321 | ) |
|
| -21.00 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State taxes (net of federal tax benefits)*: |
|
| - |
|
|
| 0.00 | % |
|
| - |
|
|
| 0.00 | % |
Change in valuation allowance |
|
| 5,170 |
|
|
| 20.98 | % |
|
| 2,306 |
|
|
| 20.87 | % |
Nondeductible permanent items |
|
| 3 |
|
|
| 0.02 | % |
|
| 15 |
|
|
| 0.13 | % |
Adjustment to tax accounts |
|
| (1,534 | ) |
|
|
|
|
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|
|
|
|
|
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|
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|
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Reported income tax expense |
| $ | - |
|
| - | % |
| $ | - |
|
| - | % | ||
*For the year ended December 31, 2025, state and local income taxes in New Jersey made up the majority (greater than 50 percent) of the tax effect in this category
The Company believes that income tax filing positions will be sustained upon examination and does not anticipate any adjustments that would result in a material adverse effect on the Company’s financial position, results of operations or cash flows. Accordingly, the Company has not recorded any reserves, or related accruals or uncertain income tax positions as of December 31, 2024.
Federal and New Jersey tax laws impose significant restrictions on the utilization of net operating loss carryforwards in the event of a change in ownership of the Company, as defined by Internal Revenue Code Section 382 (Section 382). The Company does not believe a change in ownership, as defined by Section 382, has occurred but a formal study has not been completed.
The Company has net operating loss carryforwards for federal and New Jersey income tax purposes of approximately $64,776,377 and $58,877,073, respectively, as of December 31, 2025. The federal net operating loss carryforwards, if not utilized, will carryover indefinitely. The state net operating loss carryforwards, if not utilized, will expire beginning in 2040.
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.