MANNATECH INC Income Taxes Disclosure

NOTE 8: INCOME TAXES

 

The components of the Company’s (loss) income before income taxes are attributable to the following jurisdictions for the years ended December 31 (in thousands):

 

		2025				2024
United States		$	(5,315	)		$	1
Foreign			2,426				3,739
(Loss) income before income taxes		$	(2,889	)		$	3,740

 

The components of the Company’s income tax provision (benefit) for the years ended December 31 (in thousands):

 

Current provision:		2025				2024
Federal		$	170			$	158
State			14				11
Foreign			620				1,240
			804				1,409
Deferred provision (benefit):
Federal			—				—
State			79				(47	)
Foreign			11,441				(112	)
			11,520				(159	)
		$	12,324			$	1,250

 

For the years ended December 31, 2025 and 2024, the Company’s effective tax rate was 426.6% and 33.4%, respectively. The Company's effective tax rate for the years ended December 31, 2025 and 2024, differed from the statutory rate due to a mix of earnings across jurisdictions and the associated valuation allowance recorded on losses in certain jurisdictions. The 2025 effective tax rate of  426.6% was primarily driven by losses for which a full valuation allowance was recorded, combined with taxable income in foreign jurisdictions, resulting in tax expense despite consolidated pre-tax losses.

 

A reconciliation of the Company’s United States federal statutory income tax rate and effective income tax rate is summarized as follows, for the year ended December 31, 2025 (dollars in thousands):

 

		2025
Federal statutory income taxes			21.0	%		$	(607	)
State and Local income taxes, net of federal benefit(1)			1.5				(43	)
Foreign Tax Effects:
Deferred tax liability on unremitted foreign earnings			(337.5	)			9,750
Withholding taxes			(5.9	)			170
Changes in foreign tax credits			0.4				(12	)
Difference in Foreign and U.S tax on foreign operations			(1.5	)			42
Changes in valuation allowance			(99.0	)			2,859
Non-taxable or Non-deductible items:
Nondeductible Entertainment			(5.5	)			159
Other			(3.3	)			96
Other			3.1				(90	)
			(426.6	)%		$	12,324

 

^{(1) State taxes in Texas, New Jersey and Oregon make up the majority (greater than 50%) of the tax effect of this category.}

 

The adoption of ASU 2023-09 did not have a material impact on the Company’s financial statements but expanded required rate reconciliation disclosures. The following table presents the required disclosures prior to the Company's adoption of ASU 2023-09 and reconciles the Company’s effective income tax rate and the United States federal statutory income tax rate, for the year ended December 31, 2024:

 

		2024
Federal statutory income taxes			21.0	%
State income taxes, net of federal benefit			0.2
Withholding taxes			4.3
Changes in foreign tax credits			82.2
Difference in foreign and United States tax on foreign operations			2.2
Permanent difference			8.3
Changes in valuation allowance			(80.5	)
State deferred tax			(5.6	)
Prior year Adjustments/Deferred Adjustments			1.0
Other			0.3
			33.4	%

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The decrease in net deferred tax assets was primarily driven by an increase in valuation allowance and foreign deferred tax liabilities. Significant components of the Company’s deferred tax assets and liabilities consisted of the following at December 31 (in thousands):

 

Deferred tax assets:		2025				2024
Deferred revenue		$	116			$	238
Inventory			218				287
Accrued expenses			1,892				1,683
Net operating loss (1)			5,736				4,668
Equity compensation			262				290
Foreign tax credit carryover			225				213
Lease liability			828				725
Capitalized research & development			888				1,100
Unrealized foreign exchange gains and losses			457				53
Other			477				759
Total deferred tax assets		$	11,099			$	10,016
Valuation allowance			(9,721	)			(6,862	)
Total deferred tax assets, net of valuation allowance		$	1,378			$	3,154
Deferred tax liabilities:
Prepaid expenses			257				281
Deferred commissions			325				364
Lease assets			766				684
Fixed assets			30				55
Deferred tax liability on unremitted foreign earnings			9,750				—
Total deferred tax liabilities		$	11,128			$	1,384
Total net deferred tax (liability) asset		$	(9,750	)		$	1,770

 

⁽¹⁾The Company’s net operating loss will expire as follows (dollar amounts in thousands):

 

Jurisdiction		Gross NOL				Tax Effected NOL				Expiration Years
Cyprus		$	1,577			$	197				2026 - 2029
Mexico			6,018				1,805				2026 - 2030
Switzerland			5,475				429				2026 - 2031
United States - Federal			7,318				1,529			Indefinite
United States - State			16,121				1,113			2026 - Indefinite
Other - Foreign			3,191				663			Indefinite

 

We have U.S. foreign tax credit carryforwards of $0.2 million as of December 31, 2025. The Company maintains a valuation allowance of $0.2 million against its foreign tax credit carryforwards. A significant portion of these net operating loss carryforwards are subject to valuation allowances due to uncertainty regarding their realization, particularly in jurisdictions with cumulative losses.

 

The Company recorded a deferred tax liability of $9.7 million related to the estimated tax cost associated with unremitted earnings of certain foreign subsidiaries. This liability reflects the expected tax consequences of repatriation of such earnings. 

 

 

At December 31, 2025 and 2024, the Company’s valuation allowance was $9.7 million and $6.9 million, respectively. The net change in the valuation allowance for the years ended December 31, 2025 and 2024 was an increase of $2.8 million and a decrease of $3.4 million, respectively. The provisions of ASC Topic 740 require a company to record a valuation allowance when the “more likely than not” criterion for realizing a deferred tax asset cannot be met. A company is to use judgment in reviewing both positive and negative evidence of realizing a deferred tax asset. Furthermore, the weight given to the potential effect of such evidence is commensurate with the extent the evidence can be objectively verified. The valuation allowance against the Company's deferred tax assets consisted of the following at December 31 (in millions):

 

Country		2025				2024
Cyprus		$	0.2			$	0.2
Mexico			1.8				1.8
Norway			0.1				0.1
Switzerland			0.4				0.3
Gibraltar			0.1				0.1
Thailand			0.2				0.1
United States			5.4				4.3
Australia			0.1				—
Japan			0.3				—
United Kingdom			0.1				—
Korea			0.5				—
South Africa			0.1				—
China			0.4				—
Total		$	9.7			$	6.9

 

            At  December 31, 2025 and 2024, the Company paid income taxes (net of refunds received) in the amount of $0.4 million and $0.8 million, respectively.  The income taxes (net of refunds received), consisted of the following at December 31, 2025 (in thousands): 

 

		2025
U.S. Federal		$	-
U.S. State
Massachusetts			1
Minnesota			-
New Jersey			2
New York			-
Texas			6
Other - State			2
State Subtotal		$	11
Foreign
Australia		$	-
China			-
Japan			(137	)
Korea			523
Other - Foreign			32
Foreign Subtotal		$	418
Income taxes paid, net		$	429

 

As of  December 31, 2025 and 2024, the Company had no unrecognized tax benefits.

 

The Company recognizes interest and/or penalties related to uncertain tax positions in current income tax expense. As of December 31, 2025 and 2024, the Company had no accrued interest and penalties in the consolidated balance sheets.

 

The Company is subject to examination by taxing authorities in the United States and various state and foreign jurisdictions. As of December 31, 2025, the tax years that remained subject to examination by a major tax jurisdiction for the Company’s most significant subsidiaries were as follows:

 

Jurisdiction		Open Years
China		2020 - 2024
Japan		2020 - 2024
Republic of Korea		2020 - 2024
Switzerland		2021 - 2024
United States		2022 - 2024