Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and other parts of this Report contain forward-looking statements that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,” “may,” and similar terms. Forward-looking statements are not guarantees of future performance and Company’s actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in this Report under the heading “Risk Factors,” which are incorporated herein by reference. The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included in this Report. All information presented herein is based on Company’s fiscal year 2025 results. Unless otherwise stated, references to particular years or quarters refer to the Company’s fiscal years ended in December and the associated quarters of those fiscal years. Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.
Executive Summary
In late 2024 and in 2025, the Company turned its focus to a second, newly developed Connected Surface product, the Connected Chef, but the lack of adequate working capital to produce, purchase inventory and market the Connected Chef forced the Company to pursue third party licensing, production and marketing of the Connected Chef. The Company was able to find a licensor to produce and market the Connected Chef product line in 2025, but due to the licensee’s inability to reach acceptable terms for production of the Connected Chef product line with suitable OEMs in China, the licensing arrangement was terminated in late 2025.
In 2025, we preserved cash but we continued to invest where needed to support the relaunch of the Connected Surfaces program. For fiscal year ended 2025, our business efforts were focused on finding a third party to license, produce and market the Connected Surface product and developing a new business line as the Company’s primary business line. The effort to develop a new business line was focused on the HFS industry, but the company also explored and considered other potential opportunities in other industries. The ultimate goal was development of a business line that would provide potential revenues and revenue growth and sustained profitability in order to eliminate the need for third party funding of basic corporate overhead and provide appreciation of shareholders’ investment in the Company.
On March 4, 2026, the Company issued a Lump Sum Payment Promissory Note (“eBliss Note”) for a $250,000 unsecured working capital loan from eBliss Global, Inc., a private Delaware corporation (“eBliss”) that is gearing up for production of e-bikes for personal transportation in Utica, New York in 2026. The Note contains a no shop provision under which Company and eBliss will discuss during a 90-day period the possibility of a mutually beneficial relationship, which relationship could include merger, other business combination, strategic relationship or joint venture to develop a product, or similar relationship (collectively, “Transactions”). The no-shop provision grants exclusivity to eBliss for business development by the Company for the first 60 days of the no-shop 90-day period. If no letter of intent or definitive agreement is signed with eBliss during the first 60 days of the 90-day no shop period, the Company may entertain and pursue any. Third party proposals deemed superior by the Company to any pending proposal, if any, from eBliss. There is no existing legally binding agreement by the Company or eBliss as of the date of the filing of this Form 10-K Report to consummate or enter into an agreement to consummate any Transaction. The Company’s focus is to acquire or start a new business line and during the ‘no shop’ period, the Company’s business development efforts will be focused on exploring mutually beneficial relationships and transactions with eBliss in the e-bike industry. See Note 3 - Notes Payable for further information about the eBliss Note and the no-shop provision.
Total net revenue for the year ended December 31, 2025, decreased 100% from $143,269 to $0 as compared to the same period of last year due to the Company not having an operating product line. The net operating loss was $1,070,894 for the year 2025 compared to $995,815 for the year 2024. The Company had an estimated net tax benefit provision in 2025 and 2024 of $195,958 and $124,370, respectively.
The following discussion is designed to provide a better understanding of our audited consolidated financial statements and notes thereto, including a brief overview of our business and products, key factors that impacted our performance and a summary of operating results.
Principal Factors Affecting Our Financial Performance
There are a number of industry factors that affect our financial performance which include, among others:
Overall Demand for Products and Applications. In terms of our efforts to pursue a business line based on Connected Chef, our potential for growth depends on the successful introduction and consumer acceptance of the Connected Surfaces portfolio by a third party licensee capable of production and marketing of the product. The necessity of a third party licensing effort results from the lack of adequate working capital to internally produce and market the product. We have been unable to establish a third party licensing arrangement for the Connected Chef in 2025. The Company’s products are characterized as non-essential and economic conditions, especially consumer uncertainty or worries over economic conditions and growth, affect consumer demand. Uncertainty over global economic conditions that may affect the U.S. economy is not conducive to consumer purchases of our category of consumer products. Further, it is in general difficult to obtain third party licensing arrangements for a new product that has no established sales history, especially one that faces competition from other companies as well as technological changes, like AI, changing consumer purchasing preferences and demand. We lack the working capital to re-engineer the Connected Chef to respond to new technologies that may undermine the consumer appeal of the Connected Chef. These uncertainties make demand difficult to forecast demand or future viability of Connected Chef or any other consumer product for us and our customers.
Strong and Constantly Evolving Competitive Environment . While we have demonstrated in the past our abilities to compete successfully in the retail channels since our inception, competition in the marketplace we serve is strong. Many companies have made significant investments in product development, production equipment and product marketing. Product pricing pressures exist as market participants often initiate pricing strategies to gain or protect market share. To remain competitive, market participants must continuously increase product performance or functionality, reduce costs and develop improved ways to support their customers. Further, new consumer products need to incorporate the utility and appeal of new technologies, especially generative AI. The Connected Chef does not have generative AI beyond Internet-connected applications not tailored to the Connected Chef. To address these competitive measures, we need to invest in research and development activities to support new product development (either internally or through third party contractors), sustain low product costs and deliver higher levels of performance and product functionality to differentiate our products in the market and attract third party licensees. We lack the capital to engage in this important product development, marketing and licensing efforts.
Profit Margins . The Company’s product planning strategies are driven by the need to deliver sustainable profit margins. This, in conjunction with close management of related marketing costs, are required to establish any Company’s market presence in the consumer product industry or a new business line. In 2025 and into 2026, the Company’s primary focus is the need to develop a new business line in an industry with greater growth and profit margin potential than the traditional niche consumer product industry.
Technological Innovation and Advancement . The significant impact of generative AI and other technological developments significantly impact many industries, including consumer product industry. In 2025 and into 2026, the need to integrate new technologies in consumer products to meet consumer and retailer expectations and preferences is beyond the current financial resources of the Company, which has caused the Company to focus on developing a new business line in a new industry segment.
Affordable Funding . The Company needs to secure affordable funding resources to support ongoing product development and new market penetration or internally develop a new product line or business line. The Company was unable to secure working capital in 2025 that was sufficient to fund more than basic corporate overhead necessary to sustain the corporate existence of the Company. See Note 3 – Notes Payable “eBliss Note”.
Intellectual Property Issues . Market participants rely on patented and non-patented proprietary information relating to product development and other core competencies of their business. Protection of intellectual property is important. Therefore, steps such as patent applications, confidentiality and non-disclosure agreements, as well as other security measures are generally taken. The Company has not created a litigation reserve for intellectual property rights litigation and lacks the available cash to do so. As a business judgment, the Company does not patent or copyright or trademark all intellectual property due to a combination of factors, including, in part, the cost of registration and maintenance of registration, odds and cost of successful defense of the registration and commercial value of the intellectual property rights. To enforce or protect intellectual property rights, litigation or threatened litigation is common. The Company has not sued any third parties over intellectual property rights.
Results of operations
Net Revenues
The Company had no revenue for 2025 as it did not have an operating product line. For 2024, revenue was derived from sales of our residential lighting products and Connected Surfaces Smart Mirrors. The residential products were directed towards consumer home LED lighting for both indoor and outdoor applications while the Smart Mirrors were sold directly to consumers and liquidators via e-commerce efforts. We recognized revenue upon shipment of the order to the customer when all performance obligations have been completed, and title has transferred to the customer and in accordance with the respective sale’s contractual arrangements. Each contract on acceptance will have a fixed unit price. All of our sales were to the U.S. market in 2024. All of our revenue is denominated in U.S. dollars.
Cost of Goods Sold
In 2025, we had no cost of goods sold as we have no operating product line. For 2024, our cost of goods sold consisted primarily of purchased products from contract manufacturers and when applicable associated duties and inbound freight. We sourced our manufactured LED lighting products based on customer orders.
Gross Profit
Our gross profit has been affected by a variety of factors, including average sales price for our products, product mix, promotional allowances, and our ability to reduce product cost fluctuations in the cost of our purchased components. See “Risk Factors” above in Item 1A.
Operating Expenses
In 2025, our operating expenses consisted of professional fees, consulting expenses, insurance and compliance expenses. For 2024, operating expenses included sales and marketing expenses, costs related to employee’s compensation, product development, professional fees, and insurance.
CONSOLIDATED RESULTS OF OPERATIONS AND OUTLOOK
December 31, 2025
December 31, 2024
Dollars
% of Revenue
Dollars
% of Revenue
Revenue, Net
Cost of sales
Gross Profit (Loss)
Operating Expenses:
Sales and marketing
Compensation
Professional fees
Product development
Other general and administrative
Goodwill impairment
Total Operating Expenses
Operating Loss
Other Income (Expenses)
Miscellaneous Income, net
Loss on disposal of equipment
Interest expense, net
Total Other Expenses, net
Loss Before Tax Benefit
Income Tax Expense (Benefit)
Net Loss
Net Revenues
The Company had no revenue for 2025 as it did not have an operating product line. For 2024, revenue was derived from sales of our residential lighting products and Connected Surfaces Smart Mirrors.
In April 2024, the Company liquidated the remaining Smart Mirror inventory for $80,000. The remaining sales for 2024 relate to e-commerce sales of Smart Mirrors and $58,000 in LED lighting sales.
All sales were domestic for 2024.
The following table disaggregates net revenue by major source:
For the Year Ended December 31, 2025
For the Year Ended December 31, 2024
Capstone Brand
% of Revenue
Capstone Brand
% of Revenue
Lighting Products- U.S.
Smart Mirror Products- U.S.
Total Revenue
Gross Profit and Cost of Sales
The Company did not have any gross profit or cost of sales for 2025. Gross profit for the year ended December 31, 2024, was approximately $105,250, or 73.4% of net revenues. For the year ended December 31, 2024, cost of sales was approximately $38,000.
Operating Expenses
Sales and Marketing Expenses
In 2024, sales and marketing expenses were approximately $17,000. In 2025, the Company did not incur sales and marketing expenses as the Company did not have an operating product line. As a percent to revenue, 2024 sales and marketing expenses were 12%.
Compensation Expenses
For the years ended December 31, 2025 and 2024, compensation expenses were approximately $0 and $139,000, respectively, a reduction of $139,000 or 100%. The Company reduced the workforce and the CEO and Directors are not being compensated as a result of not having an active product line during 2025.
Professional Fees
For 2025, professional fees were approximately $197,000 compared to $275,000 in 2024, a decrease of $78,000 or 28%. As a percent of net revenue, 2024 expenses were 192.6%. The decrease was driven by reduction of consulting fees down from $98,000 to zero for 2025 as the Company did not have an operating product line during 2025, offset by a slight increase in legal and accounting fees.
Product Development Expenses
For the years ended December 31, 2025, and 2024, product development expenses were approximately $2,000 and $6,000, respectively, a decrease of $4,000 or 66%, as the Company did not have an operating product line during 2025.
Other General and Administrative Expenses
For 2025 and 2024, other general and administration expenses were approximately $99,000 and $124,000, respectively, a decrease of $25,000 or 21%. As a percent to revenue, other general and administrative expenses were 0% as compared to 86.9% in 2024. The directors and officers insurance decreased $20,000 in 2025 to $49,000 and depreciation expense decreased $5,000 to $11,000 as the Company disposed of the equipment.
Goodwill Impairment Expense
The Company recognized a goodwill impairment of approximately $773,000 and $539,000 during 2025 and 2024, respectively, as the fair value of the Company was less than the carrying value of the Company.
Total Operating Expenses
For the years ended December 31, 2025, and 2024, total operating expenses were approximately $1,070,000 and $1,100,000, respectively. This represents a $30,000 or 3% increase over fiscal year 2024. The primary driver for the year to year consistency is the impairment expense recorded in both 2025 and 2024.
Operating Loss
For the years ended December 31, 2025, and 2024, total operating expenses were approximately $1,070,000 and $996,000, respectively. This represents a $75,000 or 8% increase over fiscal year 2024, which is driven by no revenues in 2025 compared to $143,000 in 2024 and a $234,000 higher goodwill impairment loss in 2025 compared to 2024.
Other Income (Expense)
Interest expense for 2025 amounted to approximately $27,000 compared to $90,000 in 2024, a decrease of $63,000 or 70%, due to the cancellation of debt and issuance of preferred B-1 stock during 2024. The Company also disposed of its last remaining equipment related to the Connected Chef and recorded a loss on disposal of approximately $18,000.
For the years ended December 31, 2025, the net tax benefit for income tax was estimated at $196,000 compared to a net tax benefit of $125,000 in the same period 2024.
The effective tax rate for the years ended December 31, 2025, and 2024, respectively, was (17.56%) and (10.07%) and the statutory tax rate was 25.5 in 2025 and 23.5% in 2024.
Net Loss Before Income Taxes
For fiscal 2025 and 2024 net loss before taxes was approximately $1,116,000 and $1,087,000, respectively, a net loss increase of approximately $29,000 over the previous year due to the reasons summarized above.
RESULTS OF OPERATIONS AND BUSINESS OUTLOOK
Our goal is to find a strategic partner to assist with a possible business combination as well as to license the Connected Chef kitchen utility device in 2026 through licensing arrangements with an appliance or other consumer product distributors, consumer product manufacturers and possibly other commercial food or kitchen product companies.
The Company will require additional working capital funding until such time as a strategic partner is found. The Company may also require additional funding to cover the costs of manufacturing Connected Chef product if the Company is able to obtain a licensing arrangement in 2026.
Contractual Obligations
The following table represents contractual obligations as of December 31, 2025.
Payments Due by Period
Total
After 2029
Accounts payable and accrued liabilities
Short-Term Debt – related parties
Total Contractual Obligations
Notes to Contractual Obligations Table
Accounts payable and accrued liabilities : Comprised of the Company’s liability for goods and services in the normal course of business.
Short Term Debt – notes payable with related parties : Related to working capital funding.
LIQUIDITY AND CAPITAL RESOURCES
During the year ended December 31, 2025, the Company used cash in operations of approximately $283,000 and generated net operating losses of $1,071,000. As of December 31, 2025, the Company had working capital deficit of $459,069 and an accumulated deficit of $12,679,768. The Company’s cash balance increased by approximately $23,000 from $16,000 as of December 31, 2024, to $39,000 as of December 31, 2025, due to proceeds from related party notes payable for working capital needs. With the reduced revenues in 2024 and no revenues in 2025, the Company reduced non-essential expenses, dissolved the Hong Kong operation, and fully impaired the goodwill of $773,165 during 2025.
In 2025, the Company sought to penetrate the HFS industry that was and continues to enjoy rapid expansion nationwide with many existing and new companies that have established operations and brand recognition. The inability of the Company to secure adequate business development funding hampered efforts in 2025 to either acquire or internally develop a new HFS industry business line. The Company believes that identification of a suitable acquisition target or a strategic alliance with an established HFS industry business may potentially enhance the ability of the Company to attract funding for acquiring or establishing a new HFS business (either internally or through an acquisition). Due to the ‘no shop’ provision in the March 2026 eBliss Note, the HFS industry business development efforts, are suspended for the 90-day ‘no shop’ period.
With the failure of the licensing effort for the Connected Chef product in November 2025, the Company is not actively pursuing product development as of the first fiscal quarter of 2026, but the Company would resume the licensing effort if an alternative business line or product opportunity is not developed by mid-2026. The Company is exploring such an arrangement with a limited number of prospective distributors.
Chairman of the Board, and former Chief Executive Officer, Stewart Wallach, funded working capital from 2022 through 2025 as the Company navigated these challenges. Total working capital note proceeds received through 2024 were $672,500 and were settled for conversion of debt into Preferred Stock, Series B-1. Coppermine has funding working capital since 2024. Total working capital note proceeds received as of the date of this filing of the Form 10-K report from Coppermine are $530,000. Coppermine has committed to lending a total of $558,191 in working capital funding through December 31, 2026. However, there is no assurance that level of funding provided by Coppermine will be adequate to meet the operating needs, licensing expenses and operating expenses of a potential business combination during 2026.
The Company does not have sufficient cash on hand to finance its plan of operations for the next 12 months from the date of the filing of this report and will need to seek additional capital through debt and/or equity financing. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
Summary of Cash Flows
Years ended December 31,
(In thousands)
Net cash provided by (used in):
Operating Activities
Investing Activities
Financing Activities
Net increase (decrease) in cash
As of December 31, 2025, the Company’s working capital deficit was approximately $459,000 of which $39,000 was cash. Current liabilities were $518,000 and include:
Accounts payable of approximately $3,854 for amounts due vendors and service providers.
Notes payable – related parties - current portion of debt included accrued interest of approximately $514,320.
Cash Flows provided by (used in) Operating Activities
Cash used in operating activities was approximately $283,000 in 2025 compared with approximately $290,000 in 2024. The cash used in operating activities in 2025 were related to essential operating expenses as the Company reduced operating costs as much as possible during 2025.
Cash Flows used in Investing Activities
There was no cash provided by investing activities for 2025 or 2024.
Cash Flows used in Financing Activities
Cash received by financing activities for the years ended December 31, 2025, and 2024, was approximately $306,000 and $269,000, respectively, and related to working capital proceeds from related parties.
Exchange Rates
We have historically sold all of our products in U.S. dollars and pay for all of our manufacturing costs in U.S. dollars.
While exchange rates have been stable for several years, we cannot assure you that the exchange rate between the United States, Chinese and Thailand currencies will continue to be stable and exchange rate fluctuations may have a material effect on our business, financial condition or results of operations.
Off Balance Sheet Arrangements
We do not have material off-balance sheet arrangements that have or are reasonably likely to have a material future effect on our results of operations or financial condition.
DIVIDENDS
We have not declared or paid any cash or other dividends on shares of our Common Stock, and we presently have no intention of paying any cash dividends on shares of our Common Stock.
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 1 of the Consolidated Financial Statements at Item 15 of this Report.
CRITICAL ACCOUNTING POLICIES
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make certain estimates and assumptions regarding matters that are inherently uncertain and that ultimately affect the reported amounts of assets, liabilities, revenues and expense, and the disclosure of contingent assets and liabilities. On an ongoing basis, management evaluates its estimates and judgments, including those related to revenue recognition; depreciation; amortization and the recovery of long-lived assets; including goodwill and intangible assets; shared base-based payment expense; and other reserves and assumptions based on management’s experience and understanding of current facts and circumstances, historical experience and other relevant factors. These estimates may differ from actual results. Certain of our accounting policies are considered critical as they are both important to reflect our financial position and results of operations and require significant or complex judgement on the part of management. The following is a summary of certain accounting policies considered critical by management.
Revenue Recognition
The Company recognizes lighting product revenue when the Company’s performance obligations as per the terms in the customers purchase order have been fully satisfied, specifically, when the specified product and quantity ordered has been manufactured and shipped pursuant to the customers requested ship window, when the sales price as detailed in the purchase order is fixed, when the product title and risk of loss for that order has passed to the customer, and collection of the invoice is reasonably assured. This means that the product ordered and to be shipped has gone through quality assurance inspection, customs and commercial documentation preparation, the goods have been delivered, title transferred to the customer and confirmed by a signed cargo receipt or bill of lading. Only at the time of shipment when all performance obligations have been satisfied will the judgement be made to invoice the customer and complete the sales contract.
The Company may enter into a licensing agreement with globally recognized companies, that allows the Company to market products under a licensed brand to retailers for a designated period of time, and whereby the Company will pay a royalty fee, typically a percentage of licensed product revenue to the licensor in order to market the licensed product.
The Company may also enter into a private label agreement, whereby the Company produces and ships products to a customer that has been packaged and will be marketed under the customers own private label.
The Company expenses license royalty fees and sales commissions when incurred and these expenses are recognized during the period the related sale is recorded. These costs are recorded within sales and marketing expenses.
Goodwill
On September 13, 2006, the Company entered into a Stock Purchase Agreement with Capstone Industries, Inc., a Florida corporation (“Capstone”). Capstone was incorporated in Florida on May 15, 1996 and is engaged primarily in the business of wholesaling technology inspired consumer products to distributors and retailers in the United States. Under the Stock Purchase Agreement, the Company acquired 100% of the issued and outstanding shares of Capstone’s Common Stock, and recorded goodwill of $1,936,020.
Goodwill acquired in business combinations is initially computed as the amount paid by the acquiring company in excess of the fair value of the net assets acquired.
In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which requires an entity to perform a one-step quantitative impairment test, whereby a goodwill impairment loss will be measured as the excess of a reporting unit’s carrying amount over its fair value (not to exceed the total goodwill allocated to that reporting unit). ASU 2017-04 was effective for the Company’s fiscal year ended December 31, 2019. The adoption of ASU 2017-04 did not have a material effect on the Company’s consolidated financial statements.
Goodwill is tested for impairment on December 31 of each year or more frequently if events or changes in circumstances indicate that the asset might be impaired. If the carrying amount exceeds its fair value, an impairment loss is recognized. Goodwill is not amortized. The Company estimates the fair value of its single reporting unit relative to the Company’s market capitalization. There was an impairment expense of $773,165 and $539,317, respectively, for the year ended December 31, 2025 and 2024, for a balance of goodwill of $0 and $773,165, respectively as of December 31, 2025, and 2024.
Accrued Liabilities
Accrued liabilities contained in the accompanying consolidated balance sheets has historically included accruals for estimated amounts of credits to be issued in future years based on operating expenses and other liabilities.
Income Taxes
The Company is subject to income taxes in the U.S. federal jurisdiction, various state jurisdictions and certain other jurisdictions. The Company accounts for income taxes under the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 740 Income Taxes . ASC 740 requires recognition of deferred income tax assets and liabilities for the expected future income tax consequences, based on enacted tax laws, of temporary differences between the financial reporting and tax bases of assets and liabilities. The Company and its U.S. subsidiaries file consolidated income tax returns.
Tax regulations within each jurisdiction are subject to the interpretation of the relaxed tax laws and regulations and require significant judgement to apply. The Company is not subject to U.S. federal, state and local tax examinations by tax authorities generally for a period of 3 years from the later of each return due date or date filed.
If the Company were to subsequently record an unrecognized tax benefit, associated penalties and tax related interest expense would be recorded as a component of income tax expense.
As of December 31, 2025, the Company had federal and state net operating loss carry forwards of approximately $4,587,000 and $6,540,000 respectively. The federal net operating loss is available to the Company indefinitely and available to offset up to 80% of future taxable income each year. The net deferred tax liability as of December 31, 2025, and 2024 was $0 and $320,000, respectively, and is reflected in long-term liabilities in the accompanying consolidated balance sheets.
The effective tax rate for the years ended December 31, 2025, and 2024, respectively, was 17.56% and 11.44% and the statutory tax rate was 25.3% in 2025 and 23.5% in 2024.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.
Deferred tax assets are to be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred assets will not be realized. The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. Management has considered the Company’s history of cumulative net losses incurred and has concluded that it is more likely than not that the Company will not realize the benefits of the deferred tax assets. Accordingly, a full valuation allowance has been established against the deferred tax assets as of December 31, 2025, and 2024. Since indefinite-lived assets cannot be used as a source of taxable income to support the realization of deferred tax asset, a valuation allowance was recorded against the deferred tax assets, and a net deferred tax liability or naked credit of approximately $0 and $320,000 is presented on the company’s balance sheet, respectively. The Company’s valuation allowance decreased by $567,000 in 2025.
The Company recognizes liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. While the Company believes that it has appropriate support for the positions taken on its tax returns, the Company regularly assesses the potential outcome of examinations by tax authorities in determining the adequacy of its provision for income taxes.
