TEN Holdings, Inc. Income Taxes Disclosure

10. Income Taxes

 

The component of loss before income taxes for the years ended December 31, 2025 and 2024 was as follows:

 Schedule of Component of Loss Before Income Taxes

		Year Ended December 31,
		2025				2024
United States		$	(19,509	)		$	(2,968	)

 

The components of income tax expense for the years ended December 31, 2025 and 2024 were as follows:

 Schedule of Income Tax Expense

			2025				2024
			Year Ended December 31,
			2025				2024
Current		$	—			$	—
Deferred			—				—
Total		$	—			$	—

 

A reconciliation of income tax expense to the amount of income tax expense at the statutory rate in the U.S. for the years ended December 31, 2025 and 2024 is as follows:

 Schedule of Reconciliation of Income Tax Expense

		2025				2024
		Year Ended December 31,
		2025				2024
Income tax benefit at the statutory rate		$	(4,097	)		$	(623	)
Increase (reduction) in taxes resulting from:
State tax—net of federal			—				(270	)
Change in valuation allowance			2,000				1,629
Permanent difference			—				71
SALT Rate change			—				(756	)
Research and development credits			—				(26	)
Nontaxable or Nondeductible Items			2,097				—
Other			—				(25	)
Income tax expense		$	—			$	—

 

 

The tax effects of temporary differences that gave rise to a significant portion of the deferred tax assets and liabilities at December 31, 2025 and 2024 were as follows

 Schedule of Deferred Tax Assets and Liabilities

		2025				2024
		December 31,
		2025				2024
Deferred tax assets:
Goodwill		$	6,844			$	7,598
Lease liability			175				181
Accrued interest			75				85
Net operating loss carryforwards			5,953				3,475
Impairment			1,301				—
R&D credit			—				122
Other			123				13
Total deferred tax assets			14,471				11,474
Deferred tax liabilities:
Fixed assets			40				53
Right-of-use assets			163				167
Assets capitalized for book not for tax			291				295
Other			234				244
Total deferred tax liabilities			728				759
Less: Valuation allowance			(13,743	)			(10,715	)
Net deferred tax assets/(liabilities)		$	—			$	—

 

As of December 31, 2025, the Company had a federal NOL carryforwards of $19,972, and state NOL carryforwards of $28,689. As a result of the Tax Cuts and Jobs Act of 2017 (“TCJA”), for U.S. income tax purposes, NOL generated in tax years beginning after December 31, 2017 may be carried forward indefinitely to offset future taxable income. The total amount of the federal NOL as of December 31, 2025 which may be carried forward indefinitely is $18,455. The state NOL may generally be carried forward for twenty years and may be applied against future taxable income.

 

The Tax Cuts and Jobs Act of 2017 (“TCJA”) amended Internal Revenue Code Section 174 related to federal tax treatment of research and experimental expenditures paid or incurred during the taxable year. The new Section 174 rules require taxpayers to capitalize and amortize such expenditures over a period of five years for domestic research and fifteen years for non-US research. For the year ended December 31, 2025 and 2024, the Company recognized a $570,856 and $506,130 favorable temporary difference for the amortization of these expenditures.

 

As of December 31, 2024, the Company had a federal NOL carryforwards of $12,373, and state NOL carryforwards of $14,125.

 

The Company recorded a valuation allowance against all of our deferred tax assets as of both December 31, 2025 and 2024. The Company intends to continue maintaining a full valuation allowance on its deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. The valuation allowance the Company recorded as of December 31, 2025 and 2024 was $13,743 and $10,715, respectively.

 

The net changes in the total valuation allowance for net deferred tax assets for the years ended December 31, 2025 and 2024 consist of the following:

 Schedule of Deferred Tax Assets Valuation Allowance

		2025				2024
		Year Ended December 31,
		2025				2024
Valuation allowance at beginning of year		$	10,715			$	9,098
Additions			3,028				1,617
Valuation allowance at end of year		$	13,743			$	10,715

 

Currently, there are no federal or state tax audits pending. The Company’s corporate federal and state tax returns from 2022 to 2024 remain subject to examination by tax authorities.

 

At December 31, 2025, the Company did not have any unrecognized tax benefits and did not anticipate any significant changes to the unrecognized tax benefits within twelve months of this reporting date. In the year ended December 31, 2025, the Company recorded no interest and penalties on income taxes. At December 31, 2025, there was no accrued interest included in income taxes payable.