FITLIFE BRANDS, INC. Income Taxes Disclosure

NOTE 10.  INCOME TAXES

 

Components of the total provision for income taxes are as follows: 

 

		Years ended December 31,
		2025				2024
Current tax expense (benefit)
Domestic		$	1,864			$	1,165
Foreign			892				1,570
Deferred tax expense (benefit)
Domestic			(882	)			148
Foreign			29				4
Provision for income taxes		$	1,903			$	2,887

 

The Company is subject to income tax in the U.S., Canada, and Germany through its wholly owned subsidiaries. The combined federal and state statutory tax rate is 24.5% (22% in 2024). The statutory tax rate in foreign jurisdictions varies by jurisdiction. During the year ended December 31, 2024, the Company dissolved Thunder Beach Holdings, its Barbados subsidiary, and will no longer be subject to taxes in Barbados.

 

The provision for income taxes differs from the amount determined by applying the federal statutory rate as follows:

 

		Year ended December 31, 2025
		Amount				Percentage
Provision for income taxes based on U.S. federal statutory tax rate		$	1,730				21.0	%
State and local income taxes, net of federal income tax effect			290				3.5	%
Foreign tax effects
Germany
Difference in jurisdictional tax rates			194				2.4	%
Other			(313	)			(3.8	)%
Canada
Other			(32	)			(0.4	)%
Non-deductible expenses			1,286				15.6	%
Foreign tax credits applied			(267	)			(3.2	)%
True up of prior period			724				8.8	%
Valuation allowance			(482	)			(5.9	)%
Impact from statutory tax rate changes			(174	)			(2.1	)%
Adjustments related to acquired assets and liabilities			(842	)			(10.2	)%
Capitalized transaction costs			(255	)			(3.1	)%
Other			44				0.5	%
Provision for income taxes		$	1,903				23.1	%

 

		Year ended December 31, 2024
Provision for income taxes based on statutory rate		$	2,668
Increase (decrease) resulting from:
Non-deductible expenses			806
Difference in jurisdictional tax rates			(401	)
True up of prior period			(57	)
Change in valuation allowance			(179	)
Other			50
Provision for income taxes		$	2,887

 

The tax effects of significant temporary differences and credit and operating loss carryforwards in the U.S. that give rise to the deferred tax asset are as follows:

 

		December 31, 2025				December 31, 2024
Loss carryforwards			780				807
Tangible assets			(18	)			(3	)
Intangible assets			(537	)			(331	)
Provisions and reserves			1,783				654
Subtotal			2,008				1,127
Valuation allowance			(483	)			(483	)
Deferred tax assets, net		$	1,525			$	644

 

The tax effects of significant temporary differences and operating loss carryforwards in foreign jurisdictions that give rise to the deferred tax liability are as follows:

 

		December 31, 2025				December 31, 2024
Loss carryforwards		$	3,035			$	3,349
Intangible assets			(2,324	)			(2,213	)
Subtotal			711				1,136
Valuation allowance			(3,035	)			(3,349	)
Deferred tax liabilities, net		$	(2,324	)		$	(2,213	)

 

The Company has assessed the realizability of the net deferred tax assets by considering the relevant positive and negative evidence available to determine whether it is more likely than not that some portion or all of the deferred tax assets will be realized. In making such a determination, the Company considered all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies, and recent results of operations.

 

As of December 31, 2025, the Company has the following U.S. federal losses carried forward. U.S. federal losses incurred prior to 2018 have a carry forward of 20 years, subsequent losses can be carried forward indefinitely. The Canadian non-capital loss carry forwards expire between 2038 and 2044.

 

Year of expiration		U.S. Federal				Canada (USD)				Total
2034		$	793				-				793
2035			2,923				-				2,923
2036			--				-				-
2037			--				-				-
2038			--				-				-
2039			--				3,616				3,616
2040			--				2,088				2,088
2041			--				1,717				1,717
2042			--				1,841				1,841
2043			--				2,172				2,172
2044			--				19				19
Total		$	3,716			$	11,453			$	15,169

 

Utilization of net operating loss carryforwards in the U.S. may be subject to limitations in the event of a change in ownership as defined under U.S. IRC Section 382, and similar state provisions. An "ownership change" is generally defined as a cumulative change in the ownership interest of significant stockholders of more than 50 percentage points over a three-year period. In connection with the merger between the Company and one of its subsidiaries in 2015, the Company has evaluated its net operating loss (“NOL”) carryforwards under the provisions of U.S. IRC Section 382. The acquisition resulted in an ownership change under Section 382, subjecting the Company’s ability to utilize NOL carryforwards generated prior to the acquisition to an annual limitation. As of December 31, 2025, the Company has approximately $3,716 of federal NOL carryforwards, of which $1,416 may be utilized subject to the Section 382 limitation. Based on the annual limitation, management expects that $2,300 of these carryforwards may not be fully utilized prior to expiration.

 

The deferred tax liability relates primarily to intangible assets that are not deductible for tax purposes in the jurisdictions to which they relate. Deferred income taxes have not been recorded on the basis differences for investments in consolidated subsidiaries as these basis differences are indefinitely reinvested or will reverse in a non-taxable manner. Quantification of the deferred income tax liability, if any, associated with indefinitely reinvested basis differences is not practicable.

 

The Company operates in a number of tax jurisdictions and is subject to examination of its income tax returns by tax authorities in those jurisdictions who may challenge any item on these returns. Because the tax matters challenged by tax authorities are typically complex, the ultimate outcome of these challenges is uncertain. The Company recognizes the effects of uncertain tax positions in the consolidated financial statements after determining that it is more-likely-than-not the uncertain tax positions will be sustained.  As of December 31, 2025, the Company has not recorded any uncertain tax positions or any accrued interest and penalties on the consolidated balance sheet. During the year ended December 31, 2025, the Company recorded an immaterial amount of interest and penalties in the consolidated statement of income and comprehensive income.

 

Cash paid for income taxes, net of refunds, for the year ended December 31, 2025 were as follows:

 

U.S. federal		$	1,329
U.S. state and local
California			185
Other state and local			74
Foreign
Germany			774
Total cash paid for income taxes, net of refunds		$	2,362