v3.26.1
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Taxes [Abstract]  
Income Taxes
14. Income Taxes

Loss before income taxes was $6.2 million and $10.3 million for the years ended December 31, 2025 and 2024, respectively. All pretax loss was generated from operations within the United States.

Income tax expense consists of the following (in thousands):

   
Year Ended December 31,
  
   
2025
    
2024
  
             
Current:
            
Federal
  
$
—
    
$
—
  
State
    
12
      
16
  
     
12
      
16
  
Deferred:
                
Federal
    
—
      
(107
)
State
    
—
      
(79
)
     
—
      
(186
)
Provision for (benefit from) income taxes
  
$
 12
    
$
(170
)

Cash paid for income taxes, net of refunds received, by jurisdiction pursuant to the disclosure requirements of ASU 2023-09 is as follows (in thousands):

   
Year Ended December 31,
  
   
2025
    
2024
  
Federal
  
$
—
    
$
—
  
State
    
     

Texas
    
9
       10

Cash paid for income taxes, net of refunds received
  
$
 9
    
$
10

Deferred tax assets and liabilities are determined based on the differences between the consolidated financial statement carrying amounts and tax bases of assets and liabilities using enacted tax rates in effect for years in which differences are expected to reverse.

Significant components of the Company’s deferred tax liability for federal income taxes consist of the following (in thousands):

   
December 31,
  
   
2025
    
2024
  
Deferred tax assets:
            
Net operating loss carryforwards
  
$
 49,215
    
$
46,295
  
Intangible assets
    
2,114
      
2,308
  
Inventories
    
73
      
57
  
Reserves and accrued expenses
    
1,539
      
2,068
  
Stock-based compensation
    
220
      
162
  
Operating lease liabilities
    
242
      
305
  
Interest expense limitation carryover
    
1,270
      
1,024
  
Goodwill
    
318
      
239
  
Property and equipment
     264
       —  
Gross deferred tax assets
    
55,255
      
52,458
  
Less: valuation allowance
    
(55,013
 )
    
(51,671
)
     
242
      
787
  
Deferred tax liabilities:
                
Property and equipment
    
—
      
(478
)
Operating lease right-of-use assets
    
(242
 )
    
(309
)
Gross deferred tax liabilities
    
(242
 )
    
(787
)
Net deferred tax liability
  
$
—
    
$
—
  

In assessing the need for a valuation allowance, management must determine that there will be sufficient taxable income to allow for the realization of deferred tax assets. Based upon historical and anticipated future losses, management has determined that the deferred tax assets do not meet the more likely than not threshold for realizability. Accordingly, a full valuation allowance has been recorded against the Company’s deferred tax assets as of December 31, 2025. The valuation allowance increased by $3.3 million during the year ended December 31, 2025. The Company does not have unrecognized tax benefits as of December 31, 2025 or 2024. The Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.
The Company had net operating loss (“NOL”) carryforwards for federal and state income tax purposes as follows (in thousands):

   
December 31,
  
   
2025
    
2024
  
             
Federal
  
$
 206,801
    
$
203,490
  
State
  
$
 68,999
    
$
62,819
  

The NOL carryforwards generated prior to 2018 began to expire for federal income tax purposes and begin expiring in 2030 for state income tax purposes. Federal and many state NOLs generated in 2018 and into the future now have an indefinite life.

The NOL carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. NOL carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code, respectively, as well as similar state provisions. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. To date, the Company has not performed an analysis to determine whether or not ownership changes have occurred since inception.

A reconciliation of income tax expense at the statutory federal income tax rate and income taxes as reflected in the consolidated financial statements is as follows in accordance with the adoption of ASU 2023-09, which became effective in the year ended December 31, 2025 (numbers in thousands):

    Year Ended December 31, 2025
  
           
Federal tax expense at statutory rate
  
$
(1,312
)
    
21.00
 %
State and local tax, net of federal benefit
              
California
    
—
      
—
 %
New York State
    
—
      
—
 %
New Jersey
    
—
      
—
 %
Florida
    
—
      
—
 %
Other
    
9
      
(0.15
 )%
Change in valuation allowance
     738      
(11.81
 )%
Nontaxable or nondeductible items
              
Nondeductible meal and entertainment expenses
    
97
      
(1.55
 )%
Nondeductible incentive stock option compensation
    
83
      
(1.33
 )%
Other
    
—
      
—
 %
Other adjustments
              
NOL expiration
    
476
      
(7.62
 )%
Other
    
(79
 )
    1.27 %
Effective income tax rate
  
$
12
      
(0.19
 )%

A reconciliation of income tax expense at the statutory federal income tax rate and income taxes as reflected in the consolidated financial statements is as follows:

 
Year Ended
December 31, 2024
  
   
Federal tax expense at statutory rate
21.00
 %
State tax, net of federal benefit
(0.12)
 %
Permanent differences
(1.15)
 %
Other difference and true ups
(3.13)
 %
Change in valuation allowance
(14.94)
 %
Effective income tax rate
1.66
 %

On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022 (“IRA”). The IRA contains certain tax measures, including a corporate alternative minimum tax of 15% on some large corporations and an excise tax of 1% on corporate stock repurchases. The provisions of the IRA did not have an impact on the Company’s consolidated financial statements for the years ended December 31, 2025 and 2024, as the Company currently does not qualify as a large corporation for the 15% alternative minimum tax and there were no stock repurchases. The Company will monitor its operations for changes that could impact the applicability of the IRA provisions in future tax years.

On July 4, 2025, the One Big Beautiful Bill Act was signed into law in the United States, which contains a broad range of tax reform provisions affecting businesses. The legislation does not have a material impact on the Company’s financial statements.