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

NOTE 9—INCOME TAXES

Loss from income taxes as of December 31, 2025 are as follows (in thousand):

 

 

2025

 

 

2024

 

Domestic income (loss)

 

$

(7,473

)

 

$

(6,497

)

Foreign income (loss)

 

 

(10

)

 

 

73

 

Loss before income taxes

 

$

(7,483

)

 

$

(6,424

)

The provision for income taxes consists of the following for the years ended December 31, 2025 and 2024 (in thousands):

 

 

 

December 31,

 

 

 

2025

 

 

2024

 

Current

 

 

 

 

 

 

Federal

 

$

—

 

 

$

—

 

States

 

 

8

 

 

 

7

 

International

 

 

1

 

 

 

22

 

Total current income tax provision

 

 

9

 

 

 

29

 

Deferred

 

 

 

 

 

 

Federal

 

 

—

 

 

 

—

 

States

 

 

—

 

 

 

—

 

International

 

 

—

 

 

 

—

 

Total deferred income tax provision

 

 

—

 

 

 

—

 

Total provision for income tax

 

$

9

 

 

$

29

 

 

Deferred tax assets consisted of the following as of December 31, 2025 and 2024 (in thousands):

 

 

December 31,

 

 

 

2025

 

 

2024

 

Net operating loss carryforward

 

$

19,916

 

 

$

19,478

 

General business tax credit

 

 

12,085

 

 

 

12,154

 

Stock options

 

 

1,104

 

 

 

1,122

 

Charitable contribution

 

 

7

 

 

 

7

 

Accrued expenses

 

 

263

 

 

 

237

 

Unearned revenue

 

 

2,563

 

 

 

2,605

 

Allowance for bad debt

 

 

204

 

 

 

253

 

Unrealized gain on foreign exchange translation and others

 

 

1,286

 

 

 

1,314

 

Section 174 Expenditures

 

 

239

 

 

 

322

 

Other

 

 

2,066

 

 

 

1,772

 

Total gross deferred tax assets

 

 

39,733

 

 

 

39,264

 

Less valuation allowance

 

 

(39,302

)

 

 

(38,838

)

Net deferred tax assets

 

$

431

 

 

$

426

 

 

Deferred tax liabilities consisted of the following as of December 31, 2025 and 2024 (in thousands):

 

 

 

2025

 

 

2024

 

Unrealized loss on available-for-sale securities

 

$

(427

)

 

$

(427

)

Other

 

 

(4

)

 

 

1

 

Total deferred tax liabilities

 

$

(431

)

 

$

(426

)

 

A valuation allowance for the net deferred tax assets is recorded when it is more likely than not that the Company will not realize these assets through future operations. The valuation allowance increased by approximately $0.5 million and decreased by $4.1 million for the year ended December 31, 2025 and December 31, 2024, respectively.

As of December 31, 2025 and December 31, 2024, the Company had net operating loss carryforwards for federal income tax purposes of approximately $78.8 million and $72.4 million, respectively, available to offset future federal taxable income, if any. $59.5 million of net operating loss generated in 2017 and prior years expire in various years through 2037. $13.2 million of net operating losses for federal income tax purpose generated in 2018 and after will be available indefinitely. In addition, the Company had net operating loss carryforwards for state income tax purposes of approximately $68.5 million and $65.3 million respectively, which generally expire in 10 to 20 years. For some states, the net operating loss generated in 2018 and after will be available indefinitely. As of December 31, 2025 and December 31, 2024, the Company has general business tax credits of $12.1 million and $12.2 million, respectively, for federal income tax purposes. The tax credits are available to offset future tax liabilities, if any, through 2043. The Company’s utilization of net operating loss carryforwards could be subject to an annual limitation as a result of certain past or future events, such as stock sales or other equity events constituting a “change in ownership” under the provisions of the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitations could result in the expiration of net operating loss carryforwards and tax credits before they can be utilized.

The income tax provision differs from that computed using the statutory federal tax rate of 21%.

A reconciliation of the U.S. Federal statutory income tax rate to the Company's effective income tax rate is as follows (in thousands for amount):

 

 

 

December 31, 2025

 

 

 

Amount

 

 

%

 

Tax benefit at statutory federal rate

 

$

(1,569

)

 

 

21.0

%

State taxes, net of federal tax benefit (1)

 

 

8

 

 

 

-0.1

%

Foreign tax effect

 

 

1

 

 

 

0.0

%

Nontaxable or Nondeductible items

 

 

 

 

 

 

  Disallowed interest expense

 

 

132

 

 

 

-1.8

%

  Other permanent items

 

 

(14

)

 

 

0.2

%

Other adjustments

 

 

 

 

 

 

  Benefit from state NOL Adjustment

 

 

(251

)

 

 

3.4

%

  Benefit on state taxes

 

 

83

 

 

 

-1.1

%

Other adjustments (individually less than 5%)

 

 

(100

)

 

 

1.3

%

Change in valuation allowance

 

 

1,719

 

 

 

-23.0

%

Total income tax provision

 

$

9

 

 

 

-0.1

%

(1) State taxes in California, Kentucky and New Jersey made up the majority (greater than 50%) of the tax effect in this category.

 

As previously disclosed for the year ended December 31, 2024 prior to the adoption of ASU 2023-09, the table below is a reconciliation of the components that caused the Company's provision (benefit) for the income taxes to differ from amounts computed using the statutory tax rate of 21 %.

 

December 31, 2024

 

Tax benefit at statutory federal rate

 

$

(1,351

)

State taxes, net of federal tax benefit

 

 

(317

)

Increase in valuation allowance

 

 

(4,058

)

Permanent items

 

 

(10

)

General business tax credit

 

 

(68

)

Stock options deferred true-up

 

 

5,674

 

Other

 

 

159

 

Total income tax provision

 

$

29

 

 

The following table summarizes he income taxes paid, net of refunds, for the year ended December 31, 2025 (in thousands):

 

December 31, 2025

 

U.S. Federal

 

$

—

 

California

 

 

6

 

New Jersey

 

 

4

 

Other states

 

 

2

 

Japan

 

 

11

 

Total income tax paid

 

$

23

 

 

As of December 31, 2025 and December 31, 2024, the Company had no unrecognized tax benefits or position which, in the opinion of management, would be reversed if challenged by a taxing authority. In the event the Company is assessed interest or penalties, such amounts would be classified as income tax expense. As of December 31, 2025, all federal tax returns since 2022 are subject to audit. The expiration of the state returns varies by state, but the 2021 and subsequent years’ returns generally are subject to audit. No tax returns are currently being examined by taxing authorities.