Annual report [Section 13 and 15(d), not S-K Item 405]

Income Taxes

v3.25.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes

11. Income Taxes

The Company is subject to multiple state minimum income tax expense for the years ended December 31, 2024 and 2023. Due to uncertainties surrounding the realization of its deferred income tax assets in future periods, the Company has recorded a 100% valuation allowance against its net deferred income tax assets. If it is determined in the future that it is more likely than not that any deferred income tax assets are realizable, the valuation allowance will be reduced by the estimated net realizable amounts.

 

 

Years Ended December 31,

 

(in thousands)

 

2024

 

 

2023

 

Income tax benefit at federal statutory rate

 

$

(3,992

)

 

$

(4,584

)

Adjustments for tax effects of:

 

 

 

 

 

 

State income tax, net of federal benefit

 

 

(650

)

 

 

(1,191

)

Permanent adjustments

 

 

305

 

 

 

49

 

Benefit state rate change

 

 

136

 

 

 

(23

)

Other

 

 

144

 

 

 

152

 

Share-based compensation

 

 

1,336

 

 

 

520

 

Net operating loss write-off

 

 

216

 

 

 

(574

)

Change in valuation allowance

 

 

2,517

 

 

 

5,659

 

Income tax expense

 

$

12

 

 

$

8

 

The tax effect of temporary differences and carryforwards that give rise to significant portions of the deferred income tax assets are as follows:

 

 

Years Ended December 31,

 

(in thousands)

 

2024

 

 

2023

 

Deferred income tax assets:

 

 

 

 

 

 

Net operating loss carryforwards

 

$

31,776

 

 

$

30,145

 

Share-based compensation

 

 

1,390

 

 

 

2,193

 

Accrued expenses

 

 

295

 

 

 

319

 

174 Capitalization

 

 

4,606

 

 

 

3,026

 

Other

 

 

267

 

 

 

170

 

 

 

38,334

 

 

 

35,853

 

Less valuation allowance

 

 

(38,333

)

 

 

(35,815

)

Total deferred income tax assets

 

 

1

 

 

 

38

 

Deferred tax liability - depreciation

 

 

—

 

 

 

(38

)

Deferred tax liability - unrealized FX (gain)/loss

 

 

(1

)

 

 

—

 

Net deferred tax assets

 

$

—

 

 

$

—

 

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Generally, the ultimate realization of deferred tax assets is dependent on the generation of future taxable income during the periods in which those temporary differences become deductible. Based on all relevant factors, a valuation allowance of $38.3 million has been established against deferred tax assets as of December 31, 2024, as management determined that it is more likely than not that sufficient taxable income will not be generated to realize those temporary differences.

At December 31, 2024, the Company had net operating loss carryforwards of approximately $123.9 million and $84.3 million available to reduce future taxable income, if any, for federal and state income tax purposes, respectively. The federal net operating loss carryforward began expiring in 2024, and the state net operating loss carryforward will begin expiring in 2028. It is possible that the Company will not generate taxable income in time to use these net operating loss carryforwards before their expiration. In addition, under Section 382 of the Internal Revenue Code of 1986 (the “Code”), as amended, if a corporation undergoes an “ownership change” (as defined in the Code), the corporation’s ability to use its pre-change tax attributes to offset its post-change income may be limited. In general, an “ownership change” occurs if there is a cumulative change in a “loss corporation’s” (as defined in the Code) ownership by 5% shareholders that exceeds 50 percentage points over a rolling three-year period.

Management has evaluated the effect of guidance provided by GAAP regarding accounting for uncertainty in income taxes and determined the Company has no uncertain tax positions that could have a significant impact on its consolidated financial statements. The Company’s federal income tax return for 2021 and subsequent years remain open for examination.