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

22. Income Taxes

 

The components of the (provision) benefit for income taxes consist of the following:

 

   2024   2023 
   Years Ended December 31, 
   2024   2023 
Current tax (provision) benefit:          
Federal  $-   $- 
State and local   (46)   (63)
Total current tax (provision) benefit   (46)   (63)
Deferred tax (provision) benefit:          
Federal   (55)   (57)
State and local   (148)   (77)
Total deferred tax (provision) benefit   (203)   (134)
Total income tax (provision) benefit  $(249)  $(197)

 

 

The components of deferred tax assets and liabilities were as follows:

 

   2024   2023 
   As of December 31, 
   2024   2023 
Deferred tax assets:          
Net operating loss carryforwards  $57,207   $52,353 
Interest limitation carryforward   14,289    10,028 
Tax credit carryforwards   264    264 
Allowance for credit losses   1,070    388 
Accrued expenses and other   999    891 
Termination fee liability   13,743    - 
Lease termination   -    1,017 
Liquidated damages   911    794 
Unearned revenue   12,626    5,148 
Stock-based compensation   4,964    7,229 
Operating lease liability   -    58 
Depreciation and amortization   -    4,146 
Deferred tax assets   106,073    82,316 
Valuation allowance   (103,606)   (76,367)
Total deferred tax assets   2,467    5,949 
Deferred tax liabilities:          
Acquired and other intangible assets   (2,729)   (6,548)
Depreciation and amortization   (518)   - 
Operating lease liability   (22)   - 
Total deferred tax liabilities   (3,269)   (6,548)
Net deferred tax liabilities  $(802)  $(599)

 

The Company must make judgements as to the realization of deferred tax assets that are dependent upon a variety of factors, including the generation of future taxable income, the reversal of deferred tax liabilities, and tax planning strategies. To the extent that the Company believes that recovery is not likely, it must establish a valuation allowance. A valuation allowance has been established for deferred tax assets which the Company does not believe meet the “more likely than not” criteria. The Company’s judgments regarding future taxable income may change due to changes in market conditions, changes in tax laws, tax planning strategies or other factors. If the Company’s assumptions and consequently its estimates change in the future, the valuation allowances it has established may be increased or decreased, resulting in a respective increase or decrease in income tax expense. Based upon the Company’s historical operating losses and the uncertainty of future taxable income, the Company has provided a valuation allowance primarily against its deferred tax assets up to the deferred tax liabilities, except for deferred tax liabilities on indefinite lived intangible assets, as of December 31, 2024 and 2023.

 

 

As of December 31, 2024, the Company had federal, state, and local net operating loss carryforwards available of $210,633, $161,471 and $59,138 respectively, to offset future taxable income. Net operating losses for U.S. federal tax purposes of $184,730 do not expire (limited to 80% of taxable income in a given year) and $25,903 will expire, if not utilized, through 2037 in various amounts. As of December 31, 2023, the Company had federal, state, and local net operating loss carryforwards available of $193,801, $145,968 and $53,002, respectively, to offset future taxable income.

 

Sections 382 and 383 of the Internal Revenue Code imposes restrictions on the use of a corporation’s net operating losses, as well as certain recognized built-in losses and other carryforwards, after an ownership change occurs. A section 382 ownership change occurs if one or more stockholders or groups of stockholders who own at least 5% of the Company’s common stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Future issuances or sales of the Company’s common stock (including certain transactions involving the Company’s common stock that are outside of the Company’s control) could also result in an ownership change under section 382. If an ownership change occurs, Section 382 would impose an annual limit on the amount of pre-change net operating losses and other losses the Company can use to reduce its taxable income generally equal to the product of the total value of the Company’s outstanding equity immediately prior to the ownership change (subject to certain adjustments) and the long-term tax exempt interest rate for the month of the ownership change.

 

The Company believes that it did have a change in control under these sections in connection with its recapitalization on November 4, 2016 and utilization of the carryforwards would be limited such that the majority of the carryforwards will never be available. Accordingly, the Company has not recorded those net operating loss carryforwards and credit carryforwards in its deferred tax assets. The Company completed a section 382 analysis as of December 31, 2023 and December 31, 2024 and concluded it experienced an ownership change as a result of certain equity transactions during the rolling three-year period of 2022 to 2024. The Company concluded that its federal net operating loss carryforwards, including any net operating loss carryforwards as a result of the mergers during 2018 and 2019, resulted in annual limitations on the overall net operating loss carryforward and that an ownership change, if any, would impose an annual limit on the net operating loss carryforwards and could cause federal income taxes (similar provisions apply for state and local income taxes) to be paid earlier than otherwise would be paid if such limitations were not in effect. The federal, state, and local net operating loss carryforwards are stated net of any such anticipated limitations as of December 31, 2024 and 2023.

 

The provision (benefit) for income taxes on the statements of operations and comprehensive loss differs from the amount computed by applying the statutory federal income tax rate to loss before the benefit for income taxes, as follows:

 

   Years Ended December 31, 
   2024   2023 
   Amount   Percent   Amount   Percent 
Federal benefit expected at statutory rate  $(1,558)   21.0%  $(7,774)   21.0%
State and local taxes, net of federal benefit   (569)   7.7%   (1,714)   4.6%
Stock-based compensation   2,284    -30.8%   3,472    -9.4%
Unearned revenue   (407)   5.5%   (562)   1.5%
Interest expense   36    -0.5%   62    -0.2%
Lease termination   (407)   5.5%   (294)   0.8%
Other differences, net   198    -2.7%   735    -1.9%
Valuation allowance   672    -9.1%   6,272    -16.9%
Income tax provision (benefit) and effective income tax rate  $249    -3.4%  $197    -0.5%

 

The Company recognizes the tax benefit from uncertain tax positions only if it is “more likely than not” that the tax positions will be sustained on examination by the tax authorities, based on the technical merits of the position. The tax benefit is measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company recognizes interest and penalties related to income tax matters in income tax expense. The Company is also required to assess at each reporting date whether it is reasonably possible that any significant increases or decreases to its unrecognized tax benefits will occur during the next 12 months.

 

 

The Company did not recognize any uncertain tax position, or any accrued interest and penalties associated with uncertain tax positions for the years ended December 31, 2024 and 2023. The Company files tax returns in the U.S. federal jurisdiction and New York, California, and other states. The Company is generally subject to examination by income tax authorities for three years from the filing of a tax return, therefore, the federal and certain state returns from 2018 forward and the California returns from 2017 forward are subject to examination. The Company currently is under examination by a state tax authority.