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INCOME TAXES | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
INCOME TAXES |
14. | INCOME TAXES
There was no Federal income tax expense for the years ended December 31, 2024 and 2023 due to the Company’s net losses. Income tax expense represents the minimum state taxes due. The provision for income taxes consists of the following:
Schedule of provision for income taxes |  |  |  |  |  |  |  |
|  | 2024 |  |  | 2023 |
Current: |  |  |  |  |  |  |  |
Federal |  |  | – |  |  |  | – |
State |  |  | 13,922 |  |  |  | 14,240 |
Foreign |  |  | 199,522 |  |  |  | – |
Subtotal |  |  | 213,444 |  |  |  | 14,240 |
Deferred: |  |  |  |  |  |  |  |
Federal |  |  | – |  |  |  | – |
State |  |  | – |  |  |  | – |
Foreign |  |  | (307,101 | ) |  |  | – |
Subtotal |  |  | (307,101 | ) |  |  | – |
Cushion |  |  |  |  |  |  |  |
Net provision (benefit) |  |  | (93,657 | ) |  |  | 14,240 |
The pretax loss by country is shown below (in thousands):
Schedule of pretax loss |  |  |  |  |  |
|  | Year Ended December 31, |
|  | 2024 |  |  | 2023 |
United States |  | $ | (10,537 | ) |  | $ | (15,682 | )
International |  | $ | (839 | ) |  | $ | (366 | )
The blended Federal and State tax rate of 27.31% applies to loss before taxes. The Company’s tax expense differs from the “expected” tax expense for Federal income tax purposes, (computed by applying the United States Federal tax rate of 21% to loss before taxes), as follows (in thousands):
Schedule of income tax reconciliation |  |  |  |  |  |
|  | Year Ended December 31, |
|  | 2024 |  |  | 2023 |
Computed “expected” tax expense (benefit) |  | $ | (2,389 | ) |  | $ | (3,370 | )
State taxes, net of federal benefit |  |  | (761 | ) |  |  | (933 | )
Change in FV of Contingent Consideration |  |  | (982 | ) |  |  | – |
Non-deductible stock options |  |  | 336 |  |  |  | 14 |
Non-deductible items |  |  | 11 |  |  |  | 48 |
Foreign tax rate differential |  |  | 69 |  |  |  | 22 |
True-up to tax return |  |  | 210 |  |  |  | 70 |
Change in deferred tax asset valuation allowance |  |  | 3,412 |  |  |  | 4,161 |
Total |  | $ | (94 | ) |  | $ | 12 |
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities are as follows (in thousands):
Schedule of deferred tax assets and liabilities |  |  |  |  |  |
|  | Year Ended December 31, |
|  | 2024 |  |  | 2023 |
Deferred tax assets: |  |  |  |  |  |  |  |
Stock options |  | $ | 1,081 |  |  | $ | 1,115 |
Deferred Revenue |  |  | 151 |  |  |  | 147 |
Capitalized R&D |  |  | 828 |  |  |  | 286 |
Patents/Intangible Assets |  |  | 1,424 |  |  |  | 1,598 |
Lease Liability |  |  | 456 |  |  |  | 297 |
Other |  |  | 310 |  |  |  | 287 |
Net operating loss carryforward |  |  | 22,167 |  |  |  | 19,035 |
Total gross deferred tax assets |  |  | 26,417 |  |  |  | 22,765 |
Less: Deferred tax asset valuation allowance |  |  | (25,913 | ) |  |  | (22,500 | )
Total net deferred tax assets |  |  | 504 |  |  |  | 265 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
ROU Asset |  |  | (442 | ) |  |  | (283 | )
Depreciation |  |  | (1,352 | ) |  |  | (1,680 | )
Total deferred tax liabilities |  |  | (1,794 | ) |  |  | (1,963 | )
Total net deferred taxes |  | $ | (1,290 | ) |  | $ | (1,698 | )
As a result of the Company’s history of incurring operating losses, a full valuation allowance has been established. The valuation allowance at December 31, 2024 was $25.9 million. The increase in the valuation allowance during 2024 was $3.4 million which was all recorded through deferred taxes. At December 31, 2024, the Company has a Federal net operating loss carry forward of $79.0 million, of which $25.1 million is available to offset future net income through 2037, a State net operating loss carry forward of $84.7 million. The net operating loss (“NOL”) expires during the years 2027 to 2037 and $53.9 million may be carried forward indefinitely and limited to offsetting 80% of taxable income. The utilization of the net operating loss carryforwards is dependent upon the ability of the Company to generate sufficient taxable income during the carryforward period. In the event that a significant change in ownership of the Company occurs as a result of the Company’s issuance of common stock, the utilization of the NOL carry forward will be subject to limitation under certain provisions of the Internal Revenue Code. Management does not presently believe that such a change has occurred. No liability related to uncertain tax positions is recorded on the financial statements related to uncertain tax positions. There are no unrecognized tax benefits as of December 31, 2024. The Company does not expect that uncertain tax benefits will materially change in the next 12 months. The Company will file U.S. Federal, California, Illinois, Michigan, New York, Tennessee, Texas and Wisconsin State tax returns, and a New York City tax return. All tax returns will remain open for examination by the Federal and State taxing authorities for three and four years, respectively, from the date of utilization of any net operating loss carryforwards. No additional provision has been made for U.S. income taxes related to undistributed foreign earnings of the Company’s wholly owned Serbian subsidiary or for unrecognized deferred tax liabilities for temporary differences related to investments in subsidiaries. As such, earnings are expected to be permanently reinvested, the investments are permanent in duration, or the Company has estimated that no additional tax liability will arise as a result of the distribution of such earnings. A liability could arise if amounts are distributed by the subsidiary or if the subsidiary is ultimately disposed of. It is not practical to estimate the additional income taxes, if any, related to permanently reinvested earnings. There are no unremitted earnings as of December 31, 2024.

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