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

Income Taxes

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

13. Income Taxes

The Company adopted ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” on a prospective basis beginning with the year ended December 31, 2025. The following table presents required disclosures pursuant to ASU 2023-09 and reconciles the U.S. federal statutory tax amount to the actual global effective amount and rate for the year ended December 31, 2025.

 

Year Ended December 31, 2025

 

 

 

Amount (in thousands)

 

 

Percent

 

U.S. Federal Statutory Rate

 

$

(5,378

)

 

 

21.0

%

State and local income taxes, net of federal income tax effect (a)

 

 

22

 

 

 

-0.1

%

Foreign tax effects

 

 

33

 

 

 

-0.1

%

Effects of changes in tax laws or rates enacted in the current period

 

 

—

 

 

 

—

 

Effects of cross-border tax laws

 

 

—

 

 

 

—

 

Tax credits

 

 

—

 

 

 

—

 

Changes in valuation allowance

 

 

5,124

 

 

 

20.0

%

Nontaxable and nondeductible items

 

 

 

 

 

 

Excess share-based compensation

 

 

(41

)

 

 

0.2

%

Other

 

 

295

 

 

 

-1.2

%

Changes in unrecognized tax benefit

 

 

—

 

 

 

—

 

Other adjustments

 

 

—

 

 

 

—

 

Effective tax rate

 

$

55

 

 

 

-0.2

%

 

 

 

 

 

 

 

(a) State taxes in South Carolina, Massachusetts and New Jersey made up the majority (greater than 50%) of the tax effect in this category.

 

 

 

 

 

 

 

 

The following table presents the required disclosures prior to adoption of ASU 2023-09 and reconciles the U.S. federal statutory income tax rate to the actual global effective amount and rate for the year ended December 31, 2024.

 

Year Ended December 31,

 

(in thousands)

 

2024

 

Income tax benefit at federal statutory rate

 

$

(3,992

)

Adjustments for tax effects of:

 

 

 

State income tax, net of federal benefit

 

 

(650

)

Permanent adjustments

 

 

305

 

Benefit state rate change

 

 

136

 

Other

 

 

144

 

Share-based compensation

 

 

1,336

 

Net operating loss write-off

 

 

216

 

Change in valuation allowance

 

 

2,517

 

Income tax expense

 

$

12

 

 

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)

 

2025

 

 

2024

 

Deferred income tax assets:

 

 

 

 

 

 

Net operating loss carryforwards

 

$

64,837

 

 

$

31,776

 

Share-based compensation

 

 

1,300

 

 

 

1,390

 

Accrued expenses

 

 

747

 

 

 

295

 

174 Capitalization

 

 

—

 

 

 

4,606

 

Unrealized FX (gain)/loss

 

 

5

 

 

 

—

 

Other

 

 

408

 

 

 

267

 

 

 

67,297

 

 

 

38,334

 

Less valuation allowance

 

 

(64,155

)

 

 

(38,333

)

Total deferred income tax assets

 

 

3,142

 

 

 

1

 

Deferred tax liability - property and equipment

 

 

(117

)

 

 

—

 

Deferred tax liability - intangibles

 

 

(3,379

)

 

 

—

 

Deferred tax liability - unrealized FX (gain)/loss

 

 

—

 

 

 

(1

)

Net deferred tax assets

 

$

(354

)

 

$

—

 

 

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 $64.2 million has been established against deferred tax assets as of December 31, 2025, as management determined that it is more likely than not that sufficient taxable income will not be generated to realize those temporary differences.

 

The net deferred tax liability of $0.4 million as of December 31, 2025 relates to the acquisition of IRRAS, primarily related to book intangibles (with finite useful lives for book purposes and carryover tax basis) partially offset by tax net operating losses. As of December 31, 2024, the Company had no material net deferred tax liability and maintained a full valuation allowance against its net deferred income tax assets due to uncertainties surrounding their realization in future periods. Due to the timing of the acquisition late in 2025, any partial release of the valuation allowance would be reflected in the year ended December 31, 2025, and future periods as evidence of realizability evolves. The Company is subject to multiple state minimum income tax expenses for the years ended December 31, 2025 and 2024. 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.

At December 31, 2025, the Company had net operating loss carryforwards of approximately $258.2 million and $163.1 million available to reduce future taxable income, if any, for federal and state income tax purposes, respectively. The federal net operating loss carryforwards begin expiring in 2026, and the state net operating loss carryforwards 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 2022 and subsequent years remain open for examination.