Sadot Group Inc. Income Taxes Disclosure

17.       Income Taxes

 

The tax effects of temporary differences that give rise to deferred tax assets and liabilities as of December 31, 2025 and 2024 are presented below:

 

Schedule of deferred tax assets and liabilities
		As of
		December 31, 2025				December 31, 2024
		$’000				$’000
Deferred tax assets:
Net operating loss carryforwards			19,967				14,525
Receivable allowance			5,947				10
Stock-based compensation			59				58
Intangible assets			—				—
163(j) adjustment			2,299				1,091
Loss on discontinued operations			263				—
Accrued expenses			90				159
Other carryforwards			158				158
Leases			24				58
Gross deferred tax asset			28,807				16,059
Deferred tax liabilities:
Property and equipment			(3	)			(46	)
Leases			—				(28	)
Unrealized gains			96				(3,969	)
Receivable allowance			—				—
Gross deferred tax liabilities			93				(4,043	)
Net deferred tax assets			28,900				12,016
Valuation allowance			(28,900	)			(12,016	)
Net deferred tax asset, net of valuation allowance			—				—

 

The income tax (benefit) / expense for the periods shown consist of the following:

 

Schedule of income tax (benefit)
		For the Year Ended December 31,
		2025				2024
		$’000				$’000
Federal:
Current			—				—
Deferred			—				—
State and local:
Current			—				—
Deferred			—				—
Foreign:
Current			(228	)			3
Deferred			—				—
Current and deferred income tax expense			(228	)			3
Change in valuation allowance			—				—
Income tax (benefit) /expense			(228	)			3

 

A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the periods shown, are as follows:

 

Schedule of Effective Income Tax Rate Reconciliation
		As of
		December 31, 2025				December 31, 2024
Federal income tax benefit at statutory rate			21.0	%			21.0	%
State income tax benefit, net of federal impact			(0.8	)%			2.2	%
Permanent differences			—	%			0.6	%
Return to provision adjustments			(1.4	)%			2.8	%
Foreign Tax			—	%			(1.1	)%
Fair value gain/loss on share issuance			—	%			(21.8	)%
Deferred adjustments due to discontinued operations			—	%			14.8	%
Other			—	%			—	%
Change in valuation allowance			(18.8	)%			(18.4	)%
Effective income tax rate			—	%			0.1	%

 

The Company has filing obligations in what it considers its U.S. major tax jurisdictions as follows: Connecticut, Kansas, Texas, Virginia, New York State and New York City. The earliest year that the Company is subject to examination is the year ended December 31, 2015.

 

The Company has approximately $20.0 million of Federal and State Net operating loss (“NOLs”) available to offset future taxable income. The net operating loss carryforwards generated prior to 2018, if not utilized, will expire from 2035 to 2037 for federal and state purposes.

 

As of December 31, 2025 and 2024, the Company has determined that it is more likely than not that the Company will not recognize the future tax benefit of the loss carryforwards and has recognized a valuation allowance of $28.9 million and $12.0 million, respectively. The valuation allowance decreased by approximately $16.9 million.

 

Utilization of the net operating loss carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by Section 382 and Section 383 of the Internal Revenue Code of 1986, as amended, and similar state provisions. Generally, in addition to certain entity reorganizations, the limitation applies when one or more “5 percent shareholders” increase their ownership, in the aggregate, by more than 50 percentage points over a 36-month time period testing period or beginning the day after the most recent ownership change, if shorter.