v3.25.1
Note 16 - Income Taxes
 12 Months Ended
Dec. 31, 2024
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

16. INCOME TAXES

 

The geographical breakdown of loss before provision for income taxes is as follows:

 

  

Year Ended December 31,

 
  

2024

  

2023

 

United States

 $(35,667) $(41,197)

Other jurisdictions

  (11,915)  4,076 

Loss before income taxes

 $(47,582) $(37,121)

 

The components of the provision for income taxes are as follows:

 

  

Year Ended December 31,

 
  

2024

  

2023

 

Current tax benefit:

        

Federal

 $—  $— 

Foreign

  (168)  (2)

Total current tax benefit

  (168)  (2)

Deferred tax benefit:

        

Federal

  —   — 

Foreign

  (443)  (69)

Total deferred tax benefit

 $(443) $(69)

Total benefit for income taxes

 $(611) $(71)

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

 

A valuation allowance is provided when it is more likely than not that the deferred tax assets will not be realized. On the basis of this evaluation, as of December 31, 2024, a valuation allowance of $80,429 ($73,416 as of December 31, 2023) has been recorded to recognize only the portion of the deferred tax asset that is more likely than not to be realized. The amount of the deferred tax asset is considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for growth. The valuation allowance increased by $7,013 and $9,075 for the years ended  December 31, 2024 and 2023, respectively. 

 

The Company’s effective tax rate substantially differed from the federal statutory tax rate primarily due to the change in the valuation allowance. The reconciliation between income taxes computed at the federal statutory income tax rate and the provision for income taxes is as follows:

 

  

Year Ended December 31,

 
  

2024

  

2023

 

Loss before income taxes

 $(47,582) $(37,121)

Theoretical tax benefit at the statutory rate (21% in 2024 and 2023)

  (9,992)  (7,796)

Differences in jurisdictional tax rates

  (1,733)  (1,465)

Valuation allowance

  10,479   8,452 

Non-deductible expenses

  648   1,059 

Other

  (13)  (321)

Total income tax benefit

  (611)  (71)

Net loss

 $(46,971) $(37,050)

 

The components of the deferred tax assets and deferred tax liabilities are as follows:

 

  

December 31,

 
  

2024

  

2023

 

Deferred tax assets:

        

Property and equipment

 $567  $685 

Deferred revenue

  1,532   1,453 

Allowance for expected credit losses

  2,916   3,188 

Intangible assets

  833   (20)

Non-deductible expenses

  16,432   12,280 

Warranty and other reserves

  1,356   1,221 

Other

  2,124   1,373 

Loss carryforwards

  56,128   54,268 

Valuation allowance

  (80,429)  (73,416)

Total deferred tax assets

 $1,459  $1,032 

Deferred tax liabilities:

        

Deferred revenue

 $—  $15 

Total deferred tax liabilities

 $—  $15 

 

As of December 31, 2024, the Company had federal, state and foreign non-operating loss (“NOL”) carryforwards of approximately $229,631 ($217,643 in 2023). The use of these NOL carryforwards might be subject to limitation under the rules regarding a change in stock ownership as determined by the IRC and similar state provisions; however, a complete analysis of the limitation of the NOL carryforwards will not be complete until the time the Company projects it will be able to utilize such NOLs. The NOL carryforwards expire between 2024 and indefinitely, and valuation allowances have been reserved, where necessary. The Company also had federal and state research and development credit carryforwards of approximately $422 and $377 as of December 31, 2024. The federal credits will expire starting in 2025 if not utilized. The state credits have no expiration date.

 

We may recognize the tax benefit from uncertain tax positions only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. ASC 740 also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and income tax disclosures. During the year, the Company determined that $1,459 of future tax benefits met this criterion.

 

Utilization of the research and development credits carryforwards may be subject to an annual limitation due to the ownership percentage change limitations provided by the IRC. However, the Company has not conducted a formal study to determine the extent of the limitations, which could impact the realizability of these credit carryforwards in future periods. The annual limitations may result in the expiration of the net operating losses and research and development credits before utilization.

 

The Company files income tax returns in the United States and in various state jurisdictions with varying statutes of limitations. Tax years 2018 through 2024 remain open to examination by the Internal Revenue Service for U.S. federal tax purposes.

 

Uncertain Tax Positions

 

The activity related to gross amount of unrecognized tax benefits is as follows:

 

  

Year Ended December 31,

 
  

2024

  

2023

 

Balance as of the beginning of the year

 $113  $83 

Increases related to tax positions in prior period

  14   30 

Balance as of the end of the year

 $127  $113 

 

These amounts are related to certain deferred tax assets with a corresponding valuation allowance. If recognized, the impact on the Company’s effective tax rate would not be material due to the full valuation allowance. Management believes that there will not be any significant changes in the Company’s unrecognized tax benefits in the next twelve months.

 

The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes in the accompanying consolidated statements of operations. Accrued interest and penalties, if applicable, are included in accrued expenses and other current liabilities in the consolidated balance sheets. For the years ended December 31, 2024 and 2023, the Company did not recognize any accrued interest and penalties.

 

The activity related to the tax effected amount of the recognized tax position as follows:

 

  

Year Ended December 31,

 
  

2024

  

2023

 

Balance as of the beginning of the year

 $-  $(376)

Reduction related to tax position taken during the current period

  —   376 

Balance as of the end of the year

 $—  $— 

 

The Company has derecognized the full amount of the potential tax liability plus interest as the uncertain tax position is statute barred as of December 31, 2024.