NextPlat Corp Income Taxes Disclosure

Note 18. Income Taxes

 

The Company accounts for income taxes under ASC Topic 740: Income Taxes which requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and the tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax losses and tax credit carry forwards. ASC Topic 740 additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets.

 

The components of earnings (loss) before income taxes for the years ended December 31, 2025 and 2024 were as follows (in thousands):

 

		Years Ended December 31,
		2025				2024
Net loss before income taxes:
Domestic		$	(10,584	)		$	(22,681	)
Foreign			121				226
		$	(10,463	)		$	(22,455	)

 

Income tax provision consisted of the following for the years ended December 31, 2025 and 2024 (in thousands):

 

		Years Ended December 31,
		2025				2024
Income tax provision:
Current:
Federal		$	—			$	—
State			—				—
Foreign							71
Total current			—				71
Deferred:
Federal			—				—
State			—				—
Foreign			—				—
Total deferred			—				—
Total income tax provision		$	—			$	71

 

The Company’s wholly owned subsidiary, GTC, is a United Kingdom (“UK”) Limited Company and files tax returns in the UK. Its estimated tax liability for December 31, 2025 and 2024 is approximately $0 and $56,000, respectively. The estimated tax liability of $56,000 differs from the estimated tax expense of approximately $71,000 due to true-up adjustments of approximately $15,000 that were recorded in 2024.

 

The Company adopted ASU 2023-09 for the year ended December 31, 2025. A reconciliation of the income tax provision by applying the statutory United States federal income tax rate to loss before income taxes is as follows (dollars in thousands):

 

		Year Ended December 31, 2025
		Amount				Rate
U.S. federal statutory tax rate		$	(2,223	)			21	%
State tax rate, net of federal effect			(445	)			4	%
Change in valuation allowance			2,551				(24	)%
Nontaxable or nondeductible items			38				(0	)%
Other adjustments			79				(1	)%
Income tax provision		$	—				—	%

 

A reconciliation of the income tax provision by applying the statutory United States federal income tax rate to income loss before income taxes is as follows, prior to the adoption of ASU 2023-09:

 

		Year Ended December 31, 2024
Federal income tax provision at statutory rate		$	(1,666	)
Deferred state income taxes, net			(293	)
Provision true-up adjustments			72
Foreign taxes at rate different than US Taxes			71
Permanent differences			142
Other true-ups			4
Change in valuation allowance			1,741
Income tax provision		$	71

 

Deferred tax assets and liabilities are provided for significant income and expense items recognized in different years for tax and financial reporting purposes. Temporary differences, which give rise to a net deferred tax asset is as follows (in thousands):

 

		December 31, 2025				December 31, 2024
Deferred tax assets:
Net operating loss carryforward		$	11,741			$	9,625
Property plant and equipment and intangibles asset			313				280
Equity method investment loss			806				806
Accounts receivable			26				33
Inventory			27				17
Right-of-use assets			35				171
Accrued loss contingency			444				—
Stock-based compensation			4,181				4,177
Interest limitation			619				619
Total deferred tax assets			18,192				15,728
Deferred tax liabilities:
Book basis of intangible assets in excess of tax basis			208				150
Lease liabilities			36				181
Total deferred tax liabilities			244				331
Net deferred tax asset before valuation allowance			17,948				15,397
Less: valuation allowance			(17,948	)			(15,397	)
Net deferred tax asset		$	—			$	—

 

The Company has a total net operating loss carryforward (“NOL carryforward”) of approximately $46.6 million at December 31, 2025. The NOL carryforward consists of approximately $30.1 million from NextPlat Corp and approximately $16.5 million from Progressive Care LLC. Out of the approximately $46.6 million NOL carryforward, approximately $6.3 million will begin to expire in 2032 and approximately $40.3 million will have an indefinite life. The Company has not performed an IRC Section 382 analysis of the Progressive Care NOL carryforward, so it is not known as this time the amount of the NOL carryforward available to offset NextPlat future taxable income. IRC Section 382 imposes a limitation on a company to use historical NOLs and certain other tax attributes in the event of an ownership change.

 

After consideration of all the evidence, both positive and negative, management has recorded a full valuation allowance at December 31, 2025 and 2024, due to the uncertainty of realizing the deferred income tax assets. The change in the valuation allowance for 2025 was an increase of approximately $2.6 million.

 

The Company is subject to taxation in the U.S. and various states and foreign jurisdictions. U.S. federal income tax returns for 2022 and after remain open to examination. Generally, foreign income tax returns after 2021 remain open to examination. No income tax returns are currently under examination. As of December 31, 2025 and 2024, the Company does not have any unrecognized tax benefits, and continues to monitor its current and prior tax positions for any changes. The Company recognizes penalties and interest related to unrecognized tax benefits as income tax expense. For the years ended December 31, 2025 and 2024, there were no penalties or interest recorded in income tax expense.

 

During the years ended December 31, 2025 and 2024, the Company made cash payments for foreign income taxes of approximately $35,000 and $0.2 million, respectively.