OptimizeRx CorpOPRX
OptimizeRx Corp Income Taxes Disclosure
INCOME TAXES
As of December 31, 2025, the Company had net operating loss (“NOLs”) carry-forwards for federal income tax purposes of approximately $8,500, consisting of post-2017 losses that will never expire. These net operating losses are available to offset future taxable income. The Company was formed in 2008 as a Nevada Corporation. Activity prior to incorporation is not reflected in the Company’s corporate tax returns. In the future, the cumulative net operating loss carry-forward for
income tax purposes may differ from the cumulative financial statement loss due to timing differences between book and tax reporting.
The components of income (loss) before provision for income taxes are as follows for the years ended December 31, 2025 and 2024:
| 2025 | 2024 | ||||||||||
| Domestic | 6,732 | (18,953) | |||||||||
| Foreign | 218 | (432) | |||||||||
| Income (loss) before income taxes | 6,950 | $ | (19,385) | ||||||||
The income tax expense are as follows for the years ended December 31, 2025 and 2024:
| 2025 | 2024 | ||||||||||
| Current tax expense - Federal | $ | (167) | $ | (258) | |||||||
| Current tax expense - State | (397) | (314) | |||||||||
Current tax expense - Foreign | (39) | — | |||||||||
| Total current expense | (603) | (572) | |||||||||
| Deferred tax expense - Federal | (1,145) | (96) | |||||||||
| Deferred tax expense - State | (70) | (57) | |||||||||
| Total deferred expense | (1,215) | (153) | |||||||||
| Income tax expense | $ | (1,818) | $ | (725) | |||||||
The differences between income taxes expected at the U.S. federal statutory income tax rate and income taxes reported were as follows for the year ended December 31, 2025:
| 2025 | |||||||||||
| $ | % | ||||||||||
| U.S. federal statutory tax rate | $ | (1,451) | (21) | ||||||||
State and local income taxes, net of federal income tax effect (1) | (383) | (5.5) | |||||||||
| Foreign tax effects | |||||||||||
| Croatia | |||||||||||
| Change in valuation allowance | 394 | 5.7 | |||||||||
| True up | (394) | (5.7) | |||||||||
| Other | 7 | 0.1 | |||||||||
Israel | |||||||||||
| Change in valuation allowance | 127 | 1.8 | |||||||||
| True up | (127) | (1.8) | |||||||||
| Change in valuation allowance | 1,001 | 14.4 | |||||||||
| Nontaxable or nondeductible items | |||||||||||
| 162M limitation | (88) | (1.3) | |||||||||
| ISO stock options | (264) | (3.8) | |||||||||
| Share-based compensation | (33) | (0.5) | |||||||||
| Other adjustments | |||||||||||
| Prior year adjustments | (30) | (0.4) | |||||||||
Deferred true up - share based compensation | (680) | (9.8) | |||||||||
Deferred true up - accrued severance | 228 | 3.3 | |||||||||
Deferred true up - net operating loss | (122) | (1.8) | |||||||||
| Other | $ | (3) | — | ||||||||
| Effective tax rate | $ | (1,818) | (26.2) | ||||||||
(1) State taxes in California and New Jersey accounted for the majority (greater than 50%) of the tax effect in this category.
The provision for Federal income tax consists of the following for the year ended December 31, 2024:
| 2024 | |||||
| Federal income tax expense attributable to: | |||||
| Current operations | $ | 4,071 | |||
| State tax effect, net of federal benefit | 696 | ||||
| Option exercise expenses, net of Section 162M limitations | (480) | ||||
| Goodwill impairment | (1,413) | ||||
| Stock compensation | (2,531) | ||||
| Other adjustments | (204) | ||||
| Valuation allowance | (864) | ||||
| Income tax expense | $ | (725) | |||
The cumulative tax effect of significant items comprising our net deferred tax amount at the expected rate of 21% is as follows as of December 31, 2025 and 2024:
| 2025 | 2024 | ||||||||||
| Deferred tax assets attributable to: | |||||||||||
| Net operating loss carryover | $ | 2,073 | $ | 3,304 | |||||||
| Stock compensation | 2,421 | 3,121 | |||||||||
| Operating lease liability | 118 | 105 | |||||||||
| Section 174 capitalized expenses | 1,277 | 3,091 | |||||||||
| Tax credits | 355 | 355 | |||||||||
| Goodwill | — | 171 | |||||||||
| Section 163 (J) interest limitation | 845 | 967 | |||||||||
| Other | 245 | 559 | |||||||||
| Deferred tax assets | $ | 7,334 | $ | 11,673 | |||||||
| Deferred tax liabilities attributable to: | |||||||||||
| Intangibles | $ | (10,564) | $ | (11,760) | |||||||
| Operating lease right-of-use assets | (112) | (102) | |||||||||
| Goodwill | (11) | — | |||||||||
| Other | (69) | (82) | |||||||||
| Deferred tax liabilities | (10,756) | (11,944) | |||||||||
| Net deferred tax (liability) asset | $ | (3,422) | $ | (271) | |||||||
| Valuation allowance | (2,283) | (4,220) | |||||||||
| Net deferred tax liabilities | $ | (5,705) | $ | (4,491) | |||||||
The change in the valuation allowance is as follows for the years ended December 31, 2025 and 2024:
| 2025 | 2024 | ||||||||||
| Balance at beginning of year | $ | 4,220 | $ | 3,356 | |||||||
| Additions charged to expenses | — | 864 | |||||||||
| Deductions from reserves | (1,937) | — | |||||||||
| Balance at end of year | 2,283 | $ | 4,220 | ||||||||
The ultimate realization of deferred tax assets is dependent upon the Company’s ability to generate sufficient taxable income during the periods in which the net operating losses expire and the temporary differences become deductible. The Company has considered all available evidence, both positive and negative. In assessing the need for a valuation allowance in its federal and state taxing jurisdictions, management concluded that a partial valuation allowance was appropriate as of March 31, 2025. This determination was based on consideration of historical levels of income, projections for future periods, and the significant amount of tax deductions to be generated from the future exercise of stock options. The Company maintains a valuation allowance related to non-qualified stock options and certain state tax credits, as management believes it is more likely than not, based on the weight of available evidence, that these deferred tax assets will not be realized.
The tax years 2022 to 2025 remain open for potential audit by the Internal Revenue Service. There are no uncertain tax positions as of December 31, 2025 or December 31, 2024, and none are expected in the next 12 months. The material jurisdictions where the Company is subject to potential examination by tax authorities include the United States and Croatia. Up to four years of returns remain open for potential audit in foreign jurisdictions, however any audits for periods prior to ownership by the Company are the responsibility of the previous owners.
Under certain circumstances issuance of common shares can result in an ownership change under Internal Revenue Code Section 382, which limits the Company’s ability to utilize carry-forwards from prior to the ownership change. Any such ownership change resulting from stock issuances and redemptions could limit the Company’s ability to utilize any net operating loss carry-forwards or credits generated before this change in ownership. These limitations can limit both the timing of usage of these laws, as well as the loss of the ability to use these net operating losses.
The income taxes paid by the Company are as follows for the years ended December 31, 2025 and 2024:
| 2025 | 2024 | ||||||||||
| Federal | $ | 612 | $ | — | |||||||
| State | 1,093 | 112 | |||||||||
| Foreign | 55 | 49 | |||||||||
| Total income taxes paid | $ | 1,760 | $ | 161 | |||||||
Income taxes paid (net of refunds) exceeds 5% of total income taxes paid (net of refunds) in the following jurisdictions for the years ended December 31, 2025 and 2024:
| 2025 | 2024 | ||||||||||
| State | |||||||||||
| California | $ | 229 | $ | — | |||||||
| Connecticut | — | 18 | |||||||||
| Illinois | — | 6 | |||||||||
| Indiana | 169 | — | |||||||||
| Massachusetts | 139 | 9 | |||||||||
| New Jersey | 323 | 8 | |||||||||
| New York | — | 9 | |||||||||
| Pennsylvania | 99 | 19 | |||||||||
| Texas | — | 15 | |||||||||
| Other | 134 | 28 | |||||||||
| Foreign | |||||||||||
| Croatia | $ | 55 | $ | 49 | |||||||
| $ | 1,148 | $ | 161 | ||||||||
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.