Income Taxes |
6 Months Ended |
|---|---|
Jun. 30, 2026 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes |
NOTE 9 — Income Taxes
The Company recognized income tax expense/(benefit) of $(243) and $2,295 for the three and six months ended June 30, 2026, which includes $(263) and 2,236 of discrete tax expense related to the sale of the Company’s legacy business assets. The Company recognized income tax expense of $138 and $271 for the three and six months ended June 30, 2025.
The Company’s tax expense for the six months ended June 30, 2026 is higher than our tax expense for the same period last year due to the sale of the Company’s legacy business assets.
The Company’s tax expense for discontinued operations for the six months ended June 30, 2026 is higher than its tax expense for the same period last year due to the sale of the Company’s phone and hotspot assets on January 23, 2026. Tax expense through January 23, 2026 is included in discontinued operations because they primarily relate to the sale of the assets and the gain on the sale of the assets is included in discontinued operations. After January 23, 2026, tax expense is included in continuing operations in 2026. For 2025, tax expense is included in discontinued operations.
The Company’s effective tax rate is -3.99% for the six months ended June 30, 2026, compared to 0.00% in the same period last year. This effective tax rate is calculated by dividing total tax expense for the Company by the loss from continuing operations. The Company’s effective rate is higher than the U.S federal statutory tax rate primarily due to the Company not matching the taxes on the asset sale with the income from the asset sale in the calculation.
The Company’s material income tax jurisdictions are the United States (federal and California), China and India. As a result of net operating loss and credit carryforwards, the Company is subject to audit for tax years 2023 and forward for federal and California purposes. The China and India tax years are open under the statute of limitations from 2013 and forward.
It is projected that the Company will utilize $3,477 of U.S. federal net operating loss carryovers in 2026 to partially offset the projected 2026 U.S. federal taxable income resulting from the Company’s 2026 asset sale. It is projected that the Company will have $9,615 of U.S. federal net operating loss carryovers at the end of 2026. As of June 30, 2026, the Company has a full valuation allowance on all of its U.S. federal and state deferred tax assets.
The Company is subject to ongoing tax examinations of its tax returns by the Internal Revenue Service and other tax authorities in various jurisdictions. In accordance with the guidance on the accounting for uncertainty in income taxes, the Company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes. These assessments can require considerable estimates and judgments. As of June 30, 2026, the gross amount of unrecognized tax benefits was approximately zero. If the Company’s estimates of income tax liabilities prove to be less than the ultimate assessment, then a further charge to expense would be required. If events occur and the payment of these amounts ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period in which we determine the liabilities are no longer necessary. The Company does not anticipate any material changes to its uncertain tax positions during the next twelve months.
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