XML 34 R21.htm IDEA: XBRL DOCUMENT v3.25.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes

Note 10. Income Taxes

Income Taxes

The components of the pretax loss from operations for the years ended December 31 are as follows (in thousands):

 

 

 

For the Years Ended December 31,

 

 

 

2024

 

 

2023

 

U.S. Domestic

 

$

8,761

 

 

$

12,235

 

Foreign

 

 

79

 

 

 

65

 

Pretax loss from operations

 

$

8,840

 

 

$

12,300

 

 

The income tax expense (benefit) is as follows (in thousands):

 

 

 

For the Years Ended December 31,

 

 

 

2024

 

 

2023

 

Current:

 

 

 

 

 

 

U.S. federal

 

$

—

 

 

$

—

 

State and local

 

 

30

 

 

 

16

 

Foreign

 

 

(193

)

 

 

100

 

Total current income tax (benefit) expense

 

 

(163

)

 

 

116

 

Deferred:

 

 

 

 

 

 

U.S. federal

 

 

9

 

 

 

9

 

State and local

 

 

2

 

 

 

3

 

Total deferred income tax expense

 

 

11

 

 

 

12

 

Income tax (benefit) expense

 

$

(152

)

 

$

128

 

 

Tax Rate Reconciliation

Reconciliations of the total income tax provision tax rate to the statutory federal income tax rate of 21% for the years ended December 31, 2024 and 2023, respectively, are as follows (in thousands):

 

 

 

For the Years Ended December 31,

 

 

 

2024

 

 

2023

 

Income taxes at statutory rates

 

$

(1,856

)

 

$

(2,583

)

State income tax, net of federal benefit

 

 

32

 

 

 

23

 

Permanent items

 

 

106

 

 

 

40

 

Equity based compensation

 

 

259

 

 

 

386

 

Federal research credits

 

 

(347

)

 

 

(122

)

Federal return to provision

 

 

35

 

 

 

(10

)

Foreign taxes

 

 

(194

)

 

 

100

 

Other

 

 

98

 

 

 

17

 

Change in federal valuation allowance

 

 

1,715

 

 

 

2,277

 

Income tax (benefit) expense

 

$

(152

)

 

$

128

 

 

Significant Components of Current and Deferred Taxes

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows (in thousands):

 

 

 

As of December 31,

 

 

 

2024

 

 

2023

 

Deferred tax assets:

 

 

 

 

 

 

Net operating loss carryforwards

 

$

5,094

 

 

$

5,846

 

Research and AMT credits

 

 

4,427

 

 

 

3,937

 

Stock based compensation

 

 

2,080

 

 

 

1,831

 

Lease liability

 

 

954

 

 

 

383

 

Section 174 R&D Capitalization

 

 

5,527

 

 

 

4,159

 

Accrued and other

 

 

908

 

 

 

760

 

Deferred tax assets

 

 

18,990

 

 

 

16,916

 

Less valuation allowance

 

 

(16,696

)

 

 

(14,578

)

Deferred tax assets, net of allowance

 

 

2,294

 

 

 

2,338

 

Deferred tax liabilities:

 

 

 

 

 

 

Fixed assets

 

 

(411

)

 

 

(501

)

Goodwill

 

 

(518

)

 

 

(468

)

Right-of-use asset

 

 

(953

)

 

 

(340

)

Intangible asset

 

 

(575

)

 

 

(1,180

)

Deferred tax liabilities

 

 

(2,457

)

 

 

(2,489

)

Total deferred tax liabilities

 

$

(163

)

 

$

(151

)

We have established a valuation allowance against our net deferred tax assets due to the uncertainty surrounding the realization of such assets. The Company periodically evaluates the recoverability of the deferred tax assets. At such time it is determined that it is more likely than not that deferred assets are realizable, the valuation allowance will be reduced. The Company has recorded a valuation allowance of $16.7 million as of December 31, 2024 as it does not believe it is more likely than not that certain deferred tax assets will be realized due to the recent history of both pre-tax book income and losses, the lack of taxable income available in carryback periods or feasible tax-planning strategies, the limited existing taxable temporary differences, and the subjective nature of forecasting future taxable income into the future. The Company increased its valuation allowance by approximately $2.1 million during the year ended December 31, 2024.

As of December 31, 2024 the Company had federal and state tax loss carryforwards of approximately $19.6 million, and $11.9 million, respectively. The federal loss generated post 2018 of $11.2 million will carryforward indefinitely and be available to offset up to 80% of future taxable income each year. The remaining federal and state net operating loss carryforwards begin to expire in 2029 and 2026, respectively, if unused.

As of December 31, 2024 the Company had federal and state tax credit carryforwards of approximately $2.4 million, and $2.0 million, respectively, after reduction for uncertain tax positions. The federal credits will begin to

expire in 2026, if unused, and the California credits carryforwards indefinitely. The other states credits will begin to expire in 2032.

The above NOL carryforward and the federal and state research tax credit carryforwards may be subject to an annual limitation under section 382 and 383 of the Internal Revenue Code of 1986, as amended (the "Code"), and similar state provisions if we experience one or more ownership changes which would limit the amount of NOL and tax credit carryforwards that can be utilized to offset future taxable income and tax, respectively. In general, an ownership change as defined by Section 382 and 383, results from transactions increasing ownership of certain stockholders or public groups in the stock of the corporation by more than 50 percentage points over a rolling three-year period. The Company has completed an ownership change analysis through December 31, 2024 and incorporated the impact of ownership changes prior to this date by reducing the Company's net operating loss and R&D credit carryovers that may not be utilized due to the annual limitations associated with those ownership change dates. Our use of federal and state NOLs and research credits could be limited further by the provisions of Section 382 of the U.S. Internal Revenue Code of 1986, as amended, depending upon the timing and amount of additional equity securities that we have issued or will issue, subsequent to December 31, 2024.State NOL carryforwards may be similarly limited. If a change in ownership were to have occurred, NOL and tax credits carryforwards could be eliminated or restricted. If eliminated, the related asset would be removed from the deferred tax asset schedule with a corresponding reduction in the valuation allowance. Due to the existence of the valuation allowance, limitations created by ownership changes, if any, will not impact our effective tax rate.

The following table summarizes the reconciliation of the unrecognized tax benefits activity during the years ended December 31 (in thousands):

 

 

 

2024

 

 

2023

 

Beginning unrecognized tax benefits

 

$

1,354

 

 

$

1,305

 

Gross increases - tax positions in prior period

 

 

—

 

 

 

(65

)

Gross decreases – tax positions in prior period

 

 

(175

)

 

 

—

 

Gross increases - current year tax positions

 

 

135

 

 

 

114

 

Purchase accounting

 

 

—

 

 

 

—

 

Ending unrecognized tax benefits

 

$

1,314

 

 

$

1,354

 

The unrecognized tax benefit amounts are reflected in the determination of the Company’s deferred tax assets. If recognized, none of these amounts would impact the company’s effective tax rate due to the existence of the valuation allowance against deferred tax assets. The Company does not foresee material changes to its uncertain tax benefits within the next twelve months.

The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company has no accrual for interest or penalties on balance sheets as of December 31, 2024. The Company had $0.1 million accrual for interest or penalties on balance sheets as of December 31, 2023. The Company has recognized no interest and/or penalties in the Statement of Operations for each of the years ended December 31, 2024 and 2023.

The Company is subject to taxation in the United States, various state jurisdictions, China and the United Kingdom. Due to the existence of federal, state and foreign net operating loss and credit carryovers, the Company's tax years that remain open and subject to examination by tax jurisdiction are years 2006 and forward for federal and years 2008 and forward for the state of California.