Ascent Industries Co.

03/03/2026 | Press release | Distributed by Public on 03/03/2026 16:10

Annual Report for Fiscal Year Ending DECEMBER 31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations
This discussion and analysis summarizes the significant factors affecting our consolidated operating results, financial condition, liquidity, and capital resources during the fiscal years ended December 31, 2025 and 2024. Unless otherwise noted, all references herein for the years 2025 and 2024 represent the fiscal years ended December 31, 2025 and 2024, respectively. We intend for this discussion to provide the reader with information that will assist in understanding our financial statements, the changes in certain key items in those financial statements from year to year, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our financial statements. This discussion should be read in conjunction with our consolidated financial statements and notes to the consolidated financial statements included in this Annual Report that have been prepared in accordance with accounting principles generally accepted in the United States of America. This discussion and analysis is presented in five sections:
•Executive Overview
•Results of Operations and Non-GAAP Financial Measures
•Liquidity and Capital Resources
•Material Cash Requirements from Contractual and Other Obligations
•Critical Accounting Policies and Estimates
Executive Overview
Ascent Industries Co. is a specialty chemicals platform focused on the development, production, and distribution of tailored, performance-driven chemical solutions with three production facilities located in Cleveland, Tennessee, Fountain Inn, South Carolina and Danville, Virginia. These facilities produce critical ingredients and process aids for the oil & gas, household, industrial and institutional ("HII"), personal care, coatings, adhesives, sealants and elastomers ("CASE"), pulp and paper, textile, automotive, agricultural, water treatment, construction and other industries. The Company produces specialty formulations and intermediates for use in a wide variety of applications and industries with primary product lines focusing on the production of surfactants, defoamers, lubricating agents, flame retardants and chemical intermediates while offering products that are petroleum derived, as well as bio-based alternatives. End users include companies that use our products as raw materials or process aids in the manufacturing of products such as cleaners, coatings, water treatment chemicals, metal working fluids, textiles, oilfield production chemicals, agrochemical formulations and other applications
The Company was incorporated in 1958 as the successor to a chemical manufacturing business founded in 1945 known as Blackman Uhler Industries, Inc. The Company's common stock is listed on the NASDAQ Global Market - ticker symbol "ACNT".
Divestiture of Bristol Metals
On March 12, 2025, the Company and its wholly-owned subsidiaries Synalloy Metals, Inc. ("Synalloy Metals") and Bristol Metals, LLC. ("BRISMET"), entered into an Asset Purchase Agreement (the "Purchase Agreement") pursuant to which they sold substantially all of the assets related to BRISMET to Bristol Pipe and Tube, Inc., a Delaware corporation and wholly-owned subsidiary of Ta Chen International, Inc. (the "Purchaser"). Ascent and Purchaser also entered into a Transition Services Agreement (the "TSA") dated March 12, 2025, pursuant to which Ascent has agreed to provide certain transition services to Purchaser immediately after the closing for certain agreed upon transition periods. On April 4, 2025, the Company and Purchaser completed the transaction contemplated by the Purchase Agreement. The consideration for the transaction was approximately $45 million of cash proceeds, of which $4.5 million was placed in an escrow account to be received in 18 months from the closing date.
Divestiture of American Stainless Tubing
On June 23, 2025, the Company and its wholly-owned subsidiary American Stainless Tubing, Inc. ("ASTI"), entered into an Asset Purchase Agreement (the "Purchase Agreement") pursuant to which they sold substantially all of the assets related to ASTI to First Tube, LLC., a Texas limited liability company and wholly-owned subsidiary of Triple-S Steel Holdings, Inc (the "Purchaser"). On June 30, 2025, the Company and Purchaser completed the transaction contemplated by the Purchase Agreement. The consideration for the transaction was approximately $16 million of cash proceeds, of which $0.8 million was placed in an escrow account to be received in 12 months from the closing date.
Macroeconomic Events
We continue to monitor macroeconomic trends and uncertainties such as key material inflation, the effects of recently implemented tariffs, and the potential imposition of modified or additional tariffs, which may have adverse effects on net sales and profitability. As a result of the recent tariffs announced by the U.S. presidential administration and potential tariff modifications or the imposition of tariffs or export controls by other countries, we have worked with our suppliers to mitigate supply chain challenges, cost volatility, and consumer and economic uncertainty due to rapid changes in global trade policies. Much of our raw material used in production is domestically sourced and while we do not expect these factors to result in a material negative effect on our net sales or profitability in the near future, we are continuing to evaluate these factors and their potential effects as well as our ability to potentially offset all or a portion of cost increases through pricing actions and additional cost savings efforts. Economic pressures on customers and consumers, including the challenges of high inflation and the effects of increased tariffs, may negatively affect our net sales and profitability in the future.
Results of Operations
The following table sets forth the percentage relationship to net sales of each line item of the consolidated statements of income (loss). This table should be read in conjunction with the following discussion and analysis and the consolidated financial statements, including the related notes to the consolidated financial statements.
Basis Point Increase/(Decrease) in Percentage of Net Sales
2025 2024 2025 vs. 2024
Net sales 100.0 % 100.0 %
Gross profit 23.0 % 13.2 % 980
Expenses:
Selling, general and administrative expense
32.1 % 25.9 % 620
Operating loss (9.4) % (13.4) % 400
Income tax provision - % 2.2 % (220)
Net loss (7.5) % (15.6) % 810
Comparison of 2025 to 2024 - Continuing Operations
Net sales from continuing operations for the full-year 2025 decreased $5.8 million, or 7.2%, over the full-year 2024 to $74.9 million. The decrease in net sales was primarily driven by a 17.7% decrease in pounds shipped partially offset by a 10.9% increase in average selling prices .
Full-year 2025 gross profit from continuing operations increased 61.0% to $17.2 million, or 23.0% of sales, compared to $10.7 million, or 13.2% of sales, in the full-year 2024. The increase in dollars and percentage of sales for the full-year 2025 were primarily driven by improved strategic sourcing initiatives and product line management resulting in lower raw material costs as well as operational cost management and efficiencies.
Selling, general and administrative expense (SG&A) from continuing operations for the full-year 2025 increased $3.2 million to $24.1 million compared to $20.9 million for the full-year 2024. SG&A as a percentage of sales was 32.1% of sales for 2025 and 25.9% of sales for 2024. The changes in SG&A expense were primarily driven by:
•strategic investments in salaries, wages and benefits resulting in higher headcount in the current year;
•increases in rent expense, specifically related to the reclass of remaining Munhall rent expense to SG&A from COGS in the current year; and,
•increases in other expenses primarily driven by increases in share-based compensation expense, incentive bonus, taxes and licenses and dues and subscription fees.
The full-year increases were partially offset by:
•decreases in professional fees driven by decreased legal, accounting and information technology professional fees in the current year;
•decreases in bad debt expense; and,
•decreases in repair and maintenance expense.
Operating loss from continuing operations for the full-year 2025 improved to $7.0 million compared to an operating loss of $10.8 million for the full-year 2024. The operating loss decrease for the full-year 2025 was primarily driven by aforementioned increase in gross profit and non-cash lease modification gains partially offset by increases in SG&A expense and asset impairment expense.
Comparison of 2025 to 2024 - Specialty Chemicals
The following table summarizes operating results for the two years indicated. Reference should be made to Note 13to the consolidated financial statements included in Item 8of this Form 10-K.
2025 2024
(in thousands) Amount % Amount %
Net sales $ 74,942 100.0 % $ 80,763 100.0 %
Cost of goods sold 57,730 77.0 % 69,574 86.1 %
Gross profit 17,212 23.0 % 11,189 13.9 %
Selling, general and administrative expense
13,369 17.8 % 9,546 11.8 %
Acquisition costs and other 92 0.1 % 477 0.6 %
Operating income $ 3,751 5.0 % $ 1,166 1.5 %
Net sales for the Specialty Chemicals segment decreased 7.2%, or $5.8 million, to $74.9 million for 2025 compared to $80.8 million in 2024. The decrease in net sales was primarily driven by a 17.7% decrease in pounds shipped partially offset by a 10.9% decrease in average selling prices.
SG&A expense increased by $3.8 million, or 40.0%, to $13.4 million in 2025 compared to $9.5 million in 2024. SG&A as a percentage of sales increased to 17.8% in 2025 from 11.8% in 2024. The changes in SG&A expense were primarily driven by increases in corporate allocation expense and incentive bonus expense, partially offset by decreases in salaries, wages and benefits, bad debt expense, professional fees and travel expense.
Operating income for the full-year 2025 totaled $3.8 million compared to $1.2 million for the full-year 2024. The increase in operating income was primarily driven by increases in gross profit as a result of improved strategic sourcing initiatives and product line management resulting in lower raw material costs as well as operational cost management and efficiencies and lower SG&A costs.
Comparison of 2025 to 2024 - Corporate
Corporate expenses decreased $1.2 million to $10.7 million, or 14.4% of sales, in 2025 down from $11.9 million, or 14.8% of sales, in 2024. The full-year decrease results are primarily driven by increases in corporate allocation expense to operating locations and decreases in professional fees partially offset by increases in salaries, wages and benefits, stock compensation, incentive bonus, dues and subscriptions and rent expense.
Interest income was $0.8 million for 2025 compared to interest expense of $0.3 million in 2024 The change was driven by a higher interest-bearing cash balance in the current year compared to the prior year. The Company had no debt outstanding as of December 31, 2025.
The Company's effective tax rate for 2025 was less than the U.S. statutory rate of 21% primarily driven by state taxes, net of federal benefit, adjustments to the valuation allowance in the period and increases in stock-based compensation. The Company's effective tax rate for 2024 was less than the U.S. statutory rate of 21% primarily driven by discrete tax charges associated with recording a valuation allowance on cumulative US Federal and state deferred tax assets.
Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States ("GAAP"), we use the following non-GAAP financial measures: EBITDA and Adjusted EBITDA. Management believes that these non-GAAP measures are useful because they are key measures used by our management team to evaluate our operating performance, generate future operating plans and make strategic decisions as well as allow readers to compare the financial results between periods. Non-GAAP measures should not be considered as
an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the Company's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the Company's results or financial condition as reported under GAAP.
EBITDA and Adjusted EBITDA
We define "EBITDA" as earnings before interest, income taxes, depreciation and amortization. We define "Adjusted EBITDA" as EBITDA further adjusted for the impact of non-cash and other items we do not consider in our evaluation of ongoing performance. These items include: goodwill impairment, asset impairment, gain on lease modification, stock-based compensation, non-cash lease cost, acquisition costs and other fees, shelf registration costs, loss on extinguishment of debt, retention costs and restructuring and severance costs from net (loss) income. We caution investors that amounts presented in accordance with our definitions of EBITDA and Adjusted EBITDA may not be comparable to similar measures disclosed by other companies because not all companies calculate EBITDA and Adjusted EBITDA in the same manner. We present EBITDA and Adjusted EBITDA because we consider them to be important supplemental measures of our performance and investors' understanding of our performance is enhanced by including these non-GAAP financial measures as a reasonable basis for comparing our ongoing results of operations.
Consolidated EBITDA and Adjusted EBITDA from continuing operations are as follows:
Year Ended December 31,
($ in thousands) 2025 2024
Consolidated
Net loss from continuing operations $ (5,584) $ (12,577)
Adjustments:
Interest (income) expense, net (712) 417
Income taxes 22 1,806
Depreciation 3,576 3,884
Amortization 611 695
EBITDA (2,087) (5,775)
Acquisition costs and other 731 662
Asset impairments 1,622 -
Gain on lease modification (2,278) (67)
Stock-based compensation 1,070 193
Non-cash lease expense 128 112
Retention expense - 3
Restructuring and severance costs 243 177
Adjusted EBITDA $ (571) $ (4,695)
% sales (0.8) % (5.8) %
Specialty Chemicals EBITDA and Adjusted EBITDA are as follows:
Year Ended December 31,
($ in thousands) 2025 2024
Specialty Chemicals
Net income $ 3,700 $ 1,093
Adjustments:
Interest expense 52 75
Depreciation 3,481 3,809
Amortization 611 695
EBITDA 7,844 5,672
Acquisition costs and other 93 477
Stock-based compensation 126 7
Non-cash lease expense 45 66
Restructuring and severance costs 14 110
Specialty Chemicals Adjusted EBITDA $ 8,122 $ 6,332
% of segment sales 10.8 % 7.8 %
Liquidity and Capital Resources
We closely manage our liquidity and capital resources. Our liquidity requirements depend on key variables, including level of investment required to support our business strategies, the performance of our business, capital expenditures, credit facilities and working capital management. Capital expenditures and share repurchases are a component of our cash flow and capital.
Sources of Liquidity
Funds generated by operating activities supplemented by our available cash and cash equivalents and our credit facilities are our most significant sources of liquidity. As of December 31, 2025, we held $57.6 million of cash and cash equivalents, as well as $11.4 million of remaining available capacity on our revolving line of credit. Our existing cash, cash equivalents, and credit facilities balances may fluctuate during 2026. Cash from operations could also be affected by various risks and uncertainties detailed in Item 1A- Risk Factors of this report. We believe our sources of liquidity will be sufficient to fund operations and anticipated capital expenditures as well as repay our debt obligations as they become due over the next 12 months and beyond.
Cash Flows
Cash flows from continuing operations were as follows:
Year ended December 31,
(in thousands) 2025 2024
Net cash (used in) provided by:
Operating activities (7,269) 977
Investing activities (1,544) (1,120)
Financing activities (8,945) (1,318)
Net decrease in cash and cash equivalents $ (17,758) $ (1,461)
Operating Activities
The increase in cash used in operating activities for the year ended December 31, 2025 compared to cash provided by operating activities in the year ended December 31, 2024 was primarily driven by changes in working capital. Changes in working capital can vary significantly depending on factors such as the timing of inventory production and purchases, customer payments of accounts receivable and payments to vendors in the regular course of business. Inventory decreased operating cash flows for the year ended December 31, 2025 by approximately $3.0 million compared to an increase of approximately $5.0 million for 2024, while accounts payable decreased operating cash flows by approximately $1.6 million
for the year ended December 31, 2025 compared to a decrease of approximately $3.2 million for the year ended December 31, 2024. The decrease in operating cash flows from inventory is primarily due to lower inventory turns year over year partially offset by lower average inventory while the decrease in accounts payable is primarily driven by lower average accounts payable partially offset by decreases in days payables outstanding. Accounts receivable and advances decreased operating cash flow by approximately $2.6 million compared to an increase of $2.8 million in 2024. The decrease is primarily driven by the $5.3 million of escrow receivables from the BRISMET and ASTI divestitures in the current year partially offset by decreases in days sales outstanding.
Investing Activities
Net cash used in investing activities primarily consists of transactions related to capital expenditures. The increase in cash used in investing activities for the full-year 2025 compared to cash used in investing activities for the full-year 2024 was primarily driven by an increase in capital expenditures in the current year over the prior year.
Financing Activities
Net cash used in financing activities primarily consist of transactions related to our credit facilities and share repurchases. The increase in net cash used in financing activities for the full-year 2025 compared to the full-year 2024 was primarily due to increases in share repurchase activity in the current year over the prior year.
Short-term Debt
The Company has a note payable in the amount of $1.1 million with an annual interest rate of 3.68% maturing April 1, 2026, associated with the financing of the Company's insurance premium in the current year. As of December 31, 2025, the outstanding balance was $0.4 million.
Credit Facilities
On December 10, 2025, Ascent Industries Co. ("Ascent") entered into a Limited Waiver, Consent and Sixth Amendment to Credit Agreement and Omnibus Amendment to Loan Documents with BMO Bank N.A. and the other lenders under Ascent's credit facility (the "Sixth Credit Facility Amendment"). The maximum revolving loan commitment under the credit facility remains $30 million with an interest rate between 1.85% and 2.35%, depending on average availability under the credit facility and the Company's consolidated fixed charge coverage ratio. The term of the credit facility remains through December 31, 2027.
The Facility contains covenants requiring the maintenance of a minimum consolidated fixed charge coverage ratio if excess availability falls below the greater of (i) $4.5 million and (ii) 15% of the revolving credit facility. As of December 31, 2025, the Company was in compliance with all financial debt covenants.
As of December 31, 2025, the Company had no principal payments outstanding on long-term debt. As of December 31, 2025, the Company had $11.4 million of remaining availability under its credit facility. See Note 6in the notes to the consolidated financial statements for additional information on the Company's line of credit.
Stock Repurchases and Dividends
We may repurchase common stock and pay dividends from time to time pursuant to programs approved by our Board of Directors. The payment of cash dividends is also subject to customary legal and contractual restrictions. Our capital allocation strategy is to first fund operations and investments in growth and then return excess cash over time to shareholders through share repurchases and dividends.
The Company's previous share repurchase program allowed for repurchase of up to 790,383 shares of the Company's outstanding common stock and expired on February 17, 2025. On February 17, 2025, the Board of Directors authorized a new share repurchase program allowing for repurchase of up to 1.0 million shares of the Company's outstanding common stock over 24 months. On December 19, 2025, the Board of Directors authorized a new share repurchase program allowing for repurchase of up to 2.0 million shares of the Company's outstanding common stock over 24 months. The shares will be purchased from time to time at prevailing market prices, through open market or privately negotiated transactions, depending on market conditions. Under the program, the purchases will be funded from available working capital, and the repurchased shares will be returned to the status of authorized, but unissued shares of common stock or held in treasury. There is no guarantee as to the exact number of shares that will be repurchased by the Company, and the Company may discontinue
purchases at any time that management determines additional purchases are not warranted. As of December 31, 2025, the Company had 1,998,504 shares of its previous share repurchase authorization remaining.
The Company may also withhold shares from employees to satisfy either the exercise price of stock options exercised or the statutory withholding tax liability resulting from the vesting of share-based awards.
Shares repurchased for the year ended December 31, 2025 and 2024 were as follows:
Year ended December 31,
2025 2024
Share repurchase program1
740,683 101,263
Shares withheld from employees 4,841 -
Total shares repurchased 745,524 101,263
Average price per share $ 12.26 $ 10.21
Total cost of shares repurchased2
$ 9,159,661 $ 1,037,346
1Includes 745 shares repurchased under previous share repurchase program which expired on February 17, 2025 and 743,283 shares repurchased under the repurchase program authorized on February 17, 2025
2Includes broker fees incurred as part of repurchase transactions
At the end of each fiscal year, the Board reviews the financial performance and capital needed to support future growth to determine the amount of cash dividend, if any, which is appropriate. In 2025 and 2024, no dividends were declared or paid by the Company.
Other Financial Measures
Below are additional financial measures that we believe are important in understanding the Company's liquidity position from year to year. The metrics are defined as:
Liquidity Measure:
•Current ratio = current asset divided by current liabilities. The current ratio will be determined by the Company using generally accepted accounting principles, consistently applied.
Profitability Ratio:
•Return on average equity ("ROAE") = net (loss) income divided by the trailing 12-month average of equity. The ROAE will be determined by the Company using generally accepted accounting principles, consistently applied.
Results of these additional financial measures are as follows:
Year ended December 31,
2025 2024
Current ratio 6.7 2.8
Return on average equity (8.7)% (25.5)%
Material Cash Requirements from Contractual and Other Obligations
As of December 31, 2025, our material cash requirements for our known contractual and other obligations were as follows:
•Operating and Finance Leases - The Company enters into various lease agreements for real estate and manufacturing equipment used in the normal course of business. Operating and finance lease obligations were $13.3 million, with $1.0 million payable within 12 months. See Note 7for further detail of our lease obligations and the timing of expected future payments.
The Company has no off-balance sheet arrangements that are reasonably likely to have a material current or future effect on the Company's financial position, revenues, results of operations, liquidity, or capital expenditures. We expect capital spending in fiscal 2026 to be as much as $5.5 million.
Critical Accounting Policies and Estimates
The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments based on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Our significant accounting policies are described in Note 1to the consolidated financial statements included herein. We believe the following accounting policies affect the most significant estimates and management judgments used in the preparation of the Company's consolidated financial statements.
Inventory
Description
Inventory is stated at the lower of cost or net realizable value. Cost is determined by either specific identification or weighted average methods. At the end of each quarter, recent sales reports are reviewed to identify sales price trends that would indicate products or product lines that are being sold below our cost. This would indicate that an adjustment would be required.
We record an obsolete inventory reserve for identified aged inventory items with slow or no sales activity for finished goods or slow or no usage for raw materials for a certain period of time. For those inventory items, a reserve is established for a percentage of the inventory cost and is based on our current knowledge with respect to inventory levels, sales trends and historical experience. During 2025, our reserve decreased approximately $0.1 million to $1.0 millionas of December 31, 2025.
We also record an inventory reserve for the estimated shrinkage (quantity losses) between physical inventories. This reserve is based upon the most recent physical inventory results. During 2025, the inventory shrink reserve had an insignificant increase in response to estimated shrinkage rates based on results from previous physical inventories. Our inventory reserve for estimated shrinkage was $0.1 million as of December 31, 2025.
Judgments and uncertainties involved in the estimate
We do not believe that our inventories are subject to significant risk of obsolescence in the near term and we have the ability to adjust purchasing practices based on anticipated sales trends and general economic conditions. However, changes in demand, product life cycle, cost trends, product pricing or a deterioration in product quality could result in the need for additional reserves. Likewise, changes in the estimated shrink reserve may be necessary, based on the timing and results of physical inventories. We also apply judgment in the determination of levels of obsolete inventory and assumptions about net realizable value.
Effect if actual results differ from assumptions
We have not made any material changes in the methodology used to establish our reserves for obsolete inventory or inventory shrinkage during the past two fiscal years. However, it is possible that actual results could differ from recorded reserves. For instance, a 10% change in the amount of products considered obsolete would have decreased net earnings by $0.1 million for 2025. A 10% change in the estimated shrinkage rate would not have had a material impact on net earnings for 2025.
Income Taxes
Description
In determining income for financial statement purposes, we must make certain estimates and judgments in the calculation of tax expense, the resultant tax liabilities and the recoverability of deferred tax assets that arise from temporary differences between the tax and financial statement recognition of revenue and expense. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. In addition, deferred tax assets are also recorded with respect to net operating losses and other tax attribute carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Valuation allowances are established when realization of the benefit of deferred tax assets is not deemed to be more likely than not. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
We recognize net tax benefits under the recognition and measurement criteria of FASB ASC Topic 740, Income Taxes, which prescribes requirements and other guidance for financial statement recognition and measurement of positions taken or expected to be taken on tax returns. We record interest and penalties, if any, related to uncertain tax positions as a component of income tax expense.
Judgments and uncertainties involved in the estimate
We assess on a tax jurisdictional basis the likelihood that our deferred tax assets can be recovered. If recovery is not expected to exceed a more likely than not (a likelihood of less than 50 percent) threshold, the provision for taxes must be increased by recording a reserve in the form of a valuation allowance for the deferred tax assets that are estimated not to ultimately be recoverable. In this process, certain relevant criteria are evaluated including: the amount of income or loss in prior years, the existence of deferred tax liabilities that can be used to absorb deferred tax assets, the taxable income in prior carryback years that can be used to absorb net operating losses and credit carry backs, future expected taxable income and prudent and feasible tax planning strategies. Changes in taxable income, market conditions, tax laws and other factors may change our judgment regarding whether we will be able to realize the deferred tax assets. These changes, if any, may require material adjustments to the net deferred tax assets and an accompanying reduction or increase in income tax expense which will result in a corresponding increase or decrease in net income in the period when such determinations are made. The utilization of certain deferred tax assets is dependent on the amount and timing of taxable income that we will ultimately generate in the future and other factors, such as changes in tax laws.
We also assess the likelihood that our tax reporting positions will ultimately be sustained. To the extent it is determined it is more likely than not (a likelihood of more than 50 percent) that some portion, or all, of a tax reporting position will ultimately not be recognized and sustained, a provision for unrecognized tax benefit is provided by either reducing the applicable deferred tax asset or accruing an income tax liability. Our judgment regarding the sustainability of our tax reporting positions may change in the future due to changes in tax laws and other factors. These changes, if any, may require material adjustments to the related deferred tax assets or accrued income tax liabilities and an accompanying reduction or increase in income tax expense which will result in a corresponding increase or decrease in net income in the period when such determinations are made.
We have provided valuation allowances as of December 31, 2025, aggregating to $8.4 million, net of federal benefit, against our federal deferred tax assets as well as certain state and local net operating loss carryforwards and other deferred tax assets. As of December 31, 2025, the Company has no liability for unrecognized income tax benefits.
Effect if actual results differ from assumptions
Although management believes that the estimates and judgments discussed herein are reasonable, actual results could differ, which could result in income tax expense or benefits that could be material.
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