RTB Digital, Inc. Income Taxes Disclosure

11. Income Taxes

 

The components of the provision for income taxes are as follows (dollars in thousands):

 

		Year Ended December 31,
		2025				2024
Current:
Federal		$	-			$	-
State			4				21
International			978				977
Current income tax expense (benefit)			982				998
Deferred:
Federal			-				-
State			-				-
International			(87	)			142
Deferred income tax (benefit) expense			(87	)			142
Total income tax expense		$	895			$	1,140
Provision:
Income tax expense allocated to discontinued operations			577				750
Income tax expense allocated to continuing operations			318				390
Total income tax expense		$	895			$	1,140

 

Taxes on income vary from the statutory federal income tax rate applied to earnings before tax on income as follows (dollars in thousands):

 

		Year Ended December 31,
		2025				2024
Statutory federal income tax rate of 21% applied to earnings before income taxes and extraordinary items		$	(3,492	)		$	(5,413	)
State taxes - net of federal benefit			4				16
Transaction expenses			142
Gifts			-				1
Stock compensation (ISOs)			22				74
Goodwill impairment			-				613
Changes in FV of derivative liability			-				(3	)
Derecognition expense on conversion of convertible debt			(37	)			126
Sale of foreign subsidiary			1,364
Foreign withholding tax			314				384
Valuation allowance			1,911				6,076
Return to provision adjustment			1,283
Others			-				53
Foreign rate difference			(616	)			(787	)
Total		$	895			$	1,140

 

Deferred income tax assets and liabilities arising from differences between accounting for financial statement purposes and tax purposes, less valuation reserves at year-end, are as follows (dollars in thousands):

 

		Year Ended December 31,
		2025				2024
State taxes - prior year		$	2			$	4
Intangible assets			4,986				5,692
Fixed assets			23				19
Allowance for credit losses			367				453
Capitalization of research and development under Sec 174			1,992				2,357
Inventory reserve			11				29
Impairment loss on investment			410				315
Goodwill			658				755
Stock compensation (RSUs and RSAs)			78				34
Lease liability			630				899
Section 163(j) limitation			1,106				685
Unicap 263A			2				-
Contingent liability			219				-
Accrued expenses			215				257
Net operating loss carryover			33,333				31,140
Total deferred tax assets			44,032				42,639
Deferred tax liabilities:
Goodwill							-
Intangible assets							-
Right of use assets			(351	)			(844	)
Other			-				(87	)
Total deferred tax liabilities			(351	)			(931	)
Net deferred tax assets			43,681				41,708
Valuation allowance			(43,681	)			(41,795	)
Total net deferred taxes		$	-			$	(87	)

The Company uses the liability method of accounting for income taxes as set forth in ASC 740, Income Taxes (ASC 740). Under the liability method, deferred taxes are determined based on differences between the financial statement and tax bases of assets and liabilities using enacted tax rates.

 

As of December 31, 2025, the Company had Federal and State Net Operating Loss (“NOL”) carryforwards of $128.5 million and $85.2 million, respectively. Under the new tax law, the Federal NOL arising in tax years ending after December 31, 2017, will be carried forward indefinitely. The Company does not have pre-tax reform Federal NOL carryforwards as of December 31, 2025. NOL carryforwards arising from tax years ending after December 31, 2017, are $128.5 million. The State NOL carryforwards will begin to expire in 2038.

 

As of December 31, 2025, and 2024, the Company maintained a full valuation allowance for NOL carryforward deferred tax assets. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. The amount of the deferred tax asset considered realizable, however, could be reduced if estimates of future taxable income are reduced.

 

The Company files a consolidated Federal income tax return and files tax returns in various state and local jurisdictions. The statutes of limitations for its consolidated Federal income tax returns are open for years 2022 and thereafter, and state and local income tax returns are open for years 2021 and thereafter.

 

Interest and penalties related to uncertain tax positions are recognized as a component of income tax expense. For the tax years ended December 31, 2025, and 2024, the Company recognized no interest or penalties.

 

The components of loss from operations before income taxes, by jurisdiction, are as follows:

 

		Year Ended December 31,
		2025				2024
United States		$	(15,736	)		$	(32,740	)
Foreign*			(895	)			7,055
Total loss from operations before income taxes		$	(16,631	)			(25,685	)

*

Reported as a component of loss from discontinued operations in the consolidated statements of operations for the years ended December 31, 2025, and 2024. See Note 3, Discontinued Operations, for additional information.

 

Loss from operations before income taxes is derived from operations conducted in the United States and one foreign jurisdiction. Domestic results primarily reflect the Company’s U.S. operations, while foreign income substantially relates to the Company’s previously wholly owned subsidiary, Ryvyl EU. Effective June 1, 2025, the Company completed the sale of Ryvyl EU, which primarily drove the changes in the geographic mix of earnings compared to the prior year.

 

The Company paid income taxes to the following jurisdictions that individually represent greater than 5 percent of total income taxes paid during the years ended December 31, 2025, and 2024, respectively.

 

		Year Ended December 31,
		2025				2024
Federal		$	-			$	-
State			45				-
Foreign			761				848
Total taxes paid		$	806				848