Xtant Medical Holdings, Inc. Income Taxes Disclosure

(13) Income Taxes

 

The Company’s (provision) benefit for income taxes differs from applying the statutory U.S. Federal income tax rate to income before taxes. The primary difference results from providing for state income taxes and from deducting certain expenses for financial statement purposes but not for federal income tax purposes.

 

 

The components of income (loss) from operations before provision for income taxes consist of the following (in thousands):

 Schedule of Components of Loss Before Provision for Income Tax

		2025				2024
		Year Ended December 31,
		2025				2024
United States		$	9,553			$	(13,835	)
Foreign		$	(2,552	)		$	(2,427	)
Total		$	7,001			$	(16,262	)

 

The components of the (provision) benefit for income taxes current and deferred are as follows (in thousands):

 Schedule of Components of Income Tax (Provision) Benefit

		2025				2024
		Year Ended December 31,
		2025				2024
Current:
Federal		$	(1,490	)		$	—
State			(575	)			(113	)
Foreign			(1	)			(53	)
Total current			(2,066	)			(166	)
Deferred:
Federal			10				(7	)
State			28				(14	)
Total deferred			38				(21	)
Total (provision) benefit for income taxes current and deferred		$	(2,028	)		$	(187	)

 

The reconciliation of income tax benefit (expense) attributable to operations computed at the U.S. Federal statutory income tax rate of 21% to income tax expense is as follows (in thousands):

 Schedule of Effective Income Tax Rate Reconciliation

		Year Ended December 31, 2024
Statutory Federal tax rate		$	3,415
Valuation allowance			(3,163	)
State income taxes, net of Federal benefit			636
Permanent differences			(62	)
Change in state income tax rate			(42	)
Stock compensation adjustment			(210	)
Attribute expiration			(280	)
Return to provision and other adjustments			(444	)
Foreign rate differential			134
Nondeductible executive compensation			(171	)
Total (provision) benefit for income taxes current and deferred		$	(187	)

 

I			(
		Year Ended December 31, 2025
Income tax at statutory tax rate		$	(1,470	)			21.0	%
State and local income tax, net of federal income tax effect*			(432	)			6.2	%
Foreign tax effects
Germany
Changes in valuation allowance			4,115				(58.8	)%
Reduction in deferred tax assets due to disposal			(4,648	)			66.4	%
Other adjustments			183				(2.6	)%
United Kingdom
Other adjustments			(158	)			2.3	%
Other foreign jurisdictions			(4	)			0.1	%
Changes in valuation allowance			4,688				(67.0	)%
Nontaxable or nondeductible items
Share-based payment awards			(146	)			2.1	%
Executive compensation			(195	)			2.8	%
Other			(13	)			0.2	%
Other adjustments
Return to provision			659				(9.4	)%
Gain on sale of investments			(931	)			13.3	%
Reduction in deferred tax assets due to 382 limitations			(3,734	)			53.3	%
Other adjustments			58				(0.8	)%
Total (provision) benefit for income taxes current and deferred		$	(2,028	)			29.0	%

 

*

State taxes in California, New York and Texas made up the majority (greater than 50%) of the tax effect in this category.

 

Deferred tax components are as follows (in thousands):

 Schedule of Deferred Tax Assets and Liabilities

		2025				2024
		At December 31,
		2025				2024
Deferred tax assets:
Accrued liability for vacation		$	141			$	173
Accrued commissions and bonuses / compensation			432				115
Accrued contingencies			317				78
Amortization			122				518
Bad debt reserve			553				326
Capitalized R&D expenses			—				850
Charitable contributions carryforward			—				15
Lease liability			851				261
Interest expense			3,660				4,092
Inventory reserve			3,010				2,834
Net operating loss carryovers			8,814				19,160
Stock option compensation			1,230				1,022
UNICAP			142				115
Other			157				103
Total deferred tax assets			19,429				29,662
Deferred tax liabilities:
Depreciation			(370	)			(470	)
Right of use asset			(815	)			(220	)
Prepaids			(72	)			(65	)
Total deferred tax liabilities			(1,257	)			(755	)
Valuation allowance			(18,177	)			(28,949	)
Net deferred tax liabilities		$	(5	)		$	(42	)

 

Income taxes paid or refunded are as follows (in thousands):

 Schedule of Income Taxes Paid or Refunded

		Year Ended December 31, 2025
Federal		$	—
State
Texas			70
New York			17
Tennessee			9
Other			25
Foreign			—
Total income taxes paid (refunded):			121

 

 

The ultimate realization of deferred tax assets is dependent upon the existence, or generation, of taxable income in the periods when those temporary differences and net operating loss carryovers are deductible. Management considers the scheduled reversal of deferred tax liabilities, taxes paid in carryover years, projected future taxable income, available tax planning strategies, and other factors in making this assessment. Based on available evidence, management does not believe it is more likely than not that all of the deferred tax assets will be realized. Accordingly, the Company has established a valuation allowance equal to the realizable deferred tax assets. The valuation allowance decreased by $10.8 million in 2025 and increased by $3.2 million in 2024.

 

At December 31, 2025, the Company had total domestic Federal, state and foreign net operating loss carryovers of approximately $34.1 million, $36.7 million and $0.0 million, respectively. Federal net operating losses generated prior to 2018 and State net operating loss carryovers expire at various dates between 2026 and 2045. Federal net operating losses generated after 2017 have an indefinite carryforward and are only available to offset 80% taxable income beginning in 2021. Foreign net operating losses carry forward indefinitely.

 

The Company has completed studies to assess whether an ownership change, as defined by Section 382 of the Code, had occurred from the Company’s formation through December 31, 2025. Based upon these studies, the Company determined that ownership changes occurred during 2018 and 2025. Accordingly, the Company reduced its deferred tax assets related to the federal NOL carryforwards that are anticipated to expire unused as a result of these ownership changes. These tax attributes were excluded from deferred tax assets with a corresponding reduction of the valuation allowance with no net effect on income tax expense or the effective tax rate. Future ownership changes may further limit the Company’s ability to utilize its remaining tax attributes.

 

The 2023 through 2025 tax years remain open to examination by the Internal Revenue Service and various other state and foreign tax agencies. These taxing authorities have the authority to examine those tax years until the applicable statute of limitations expire. Foreign tax years remain open from 2022 to 2025.

 

As of December 31, 2025, we have no unrecognized tax benefits in long-term liabilities.

 

The Company did not recognize any material interest or penalties related to income taxes for the years ended December 31, 2025 and 2024.