ULTRALIFE CORP Income Taxes Disclosure

Note 7 - Income Taxes

 

For the years ended December 31, 2025, and 2024, we recognized an income tax (benefit) provision of ($2,447) and $1,892, respectively.

 

		Year ended December 31,
		2025				2024
Current:
Federal		$	12			$	-
State			48				50
Foreign		34					610
		94					660
Deferred:
Federal		(1,802		)			1,313
State		(248		)			58
Foreign		(491		)			(139	)
		(2,541		)			1,232
Total income tax (benefit) provision		$	(2,447	)		$	1,892

 

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for income tax purposes. Significant components of our deferred tax assets and liabilities are as follows:

 

		December 31,
		2025				2024
Deferred tax assets:
Net operating loss carryforwards		$	4,809			$	5,817
Research and development		5,448					4,894
Tax credit carryforwards		3,448					3,180
Inventory reserves		2,991					2,859
Intangible assets		610					1,678
Lease Liability		728					905
Accrued expenses and other		1,318					1,542
Total deferred tax assets		19,352					20,875
Valuation allowance for deferred tax assets		(2,530		)			(2,404	)
Net deferred tax assets		16,822					18,471
Deferred tax liabilities:
Intangible assets		(5,619		)			(9,480	)
Property, plant and equipment		(980		)			(1,113	)
Right of use asset		(729		)			(908	)
Total deferred tax liabilities		(7,328		)			(11,501	)
Net deferred tax assets		$	9,494			$	6,970

 

Net deferred tax assets (liabilities) are comprised of the following balance sheet amounts:

 

		December 31,
		2025				2024
Deferred tax assets, net		$	10,494			$	8,413
Deferred tax liabilities		(1,000		)			(1,443	)
		$	9,494			$	6,970

 

For financial reporting purposes, net (loss) income from continuing operations before income taxes is as follows:

 

		Year ended December 31,
		2025				2024
United States		$	(5,863	)		$	7,044
Foreign		(2,535		)			1,257
		$	(8,398	)		$	8,301

 

The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to income from continuing operations before income taxes as follows under the guidance in ASU 2023-09 the Company adopted on a prospective basis:

 

		Year ended December 31, 2025
Federal statutory income tax rate		$	(1,763	)			21.0	%
State and local income taxes, net of federal income tax effect (a)			(204	)			2.4
Nontaxable or nondeductible items:
Equity compensation			136				(1.6	)
Nontaxable refund credit			(296	)			3.5
Other			14				(0.2	)
Other reconciling items			(127	)			1.5
Tax credits:
R&D			(267	)			3.2
Cross-border tax laws:			(20	)			0.2
Foreign tax effects:
China
R&D deduction			(103	)			1.2
Other			(8	)			0.1
Hong Kong
Tax rate differential			131				(1.5	)
Canada
Tax rate differential			164				(2.0	)
Provincial taxes			(303	)			3.6
Change in functional currency			170				(2.0	)
Other			20				(0.2	)
Other foreign jurisdictions			9				(0.1	)
Effective income tax rate		$	(2,447	)			29.1	%

 

a.

State taxes and state tax adjustments in Florida and Virginia made up the majority (greater than 50%) of the tax effect in this category.

 

The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to income from continuing operations before income taxes as follows under the prior guidance:

 

		Year ended December 31,
		2024
Statutory income tax rate			21.0	%
Increase (decrease) in tax provision resulting from:
Equity compensation			0.5
Global intangible low-taxed income			0.7
China R&D deduction			(1.1	)
Income tax credits			(3.6	)
Tax rate changes			(0.1	)
Foreign exchange loss			0.8
Foreign tax rates			2.3
States taxes			1.1
Transaction costs			0.7
Other			0.5
Effective income tax rate			22.8	%

 

 

Upon adoption of ASU 2023-09, as described in Note 1, cash paid for income taxes, net of refunds was as follows:

 

		Year ended December 31,
		2025
Federal		$	34
State			49
Foreign:
Canada			126
China			-
United Kingdom			(91	)
India			29
Total foreign			64
Total income taxes paid, net of refunds		$	147

 

As of December 31, 2025, it was concluded that it is more likely than not that our U.S. deferred tax assets will be fully realized based on management’s assessment. In evaluating the realizability of our U.S. deferred tax assets, management considered all available evidence, both positive and negative, weighted based on objective verifiability. Our assessment also considered our ability to fully utilize before expiration our domestic net operating loss carryforwards, which begin to expire in 2031, and our federal general business tax credit carryforwards, which begin to expire in 2028. As of December 31, 2025, our federal net operating loss carryforwards, state net operating loss carryforwards, and federal general business tax credit carryforwards were $8,800, $5,100 and $3,400, respectively.

 

As of December 31, 2025, for certain past operations in the U.K., we continue to report a valuation allowance for net operating loss carryforwards of approximately $10,100, nearly all of which can be carried forward indefinitely. Management has concluded that utilization of the U.K. net operating losses may be limited due to the change in the past U.K. operation, and that they cannot currently be used to reduce taxable income of our other U.K. subsidiary, Accutronics Ltd. There are no other deferred tax assets related to the past U.K. operations.

 

As of December 31, 2025, we have not recognized a valuation allowance against our other foreign deferred tax assets, including net operating loss carryforwards of $1,300 which expire in 2029 through 2035, as we believe that it is more likely than not that they will be fully realized.

 

There were no unrecognized tax benefits related to uncertain tax positions at December 31, 2025, and 2024.

 

As of December 31, 2025, the Company maintains its assertion that all foreign earnings will be indefinitely reinvested in those operations, other than earnings generated in the U.K.

 

As a result of our operations, we file income tax returns in various jurisdictions including U.S. federal, U.S. state and foreign jurisdictions. We are routinely subject to examination by taxing authorities in these various jurisdictions. Our U.S. tax matters for 2022 through 2024 remain subject to IRS examination. Our U.S. tax matters for 2005-2007, 2009, and 2011-2015 also remain subject to IRS examination due to the remaining availability of net operating loss carryforwards generated in those years. Our U.S. tax matters for 2015 through 2024 remain subject to examination by various state and local tax jurisdictions. Our tax matters for the years 2015 through 2024 remain subject to examination by the respective foreign tax jurisdiction authorities.