Income Taxes

12 Months Ended

Dec. 31, 2024

Income Taxes [Abstract]

Income Taxes

13. Income Taxes

Income tax expense consists of the following (in thousands):

	Year Ended December 31,
	2024			2023
Current:
Federal	$	—		$	—
State		16			28
		16			28
Deferred:
Federal		(107	)		(68	)
State		(79	)		(52	)
		(186	)		(120	)
Benefit from income taxes	$	(170	)	$	(92	)

Deferred tax assets and liabilities are determined based on the differences between the consolidated financial statement carrying amounts and tax bases of assets and liabilities using enacted tax rates in effect for years in which differences are expected to reverse.

Significant components of the Company’s deferred tax liability for federal income taxes consisted of the following (in thousands):

	December 31,
	2024			2023
Deferred tax assets:
Net operating loss carryforwards	$	46,295		$	46,718
Intangible assets		2,308			2,138
Inventories		57			71
Reserves and accrued expenses		2,068			1,381
Stock-based compensation		162			180
Operating lease liabilities		305			145
Interest expense limitation carryover		1,024			552
Goodwill		239			—
Gross deferred tax assets		52,458			51,185
Less: valuation allowance		(51,671	)		(50,139	)
		787			1,046
Deferred tax liabilities:
Property and equipment		(478	)		(412	)
Operating lease right-of-use assets		(309	)		(154	)
Goodwill		—			(666	)
		(787	)		(1,232	)
Net deferred tax liability	$	—		$	(186	)

In assessing the need for a valuation allowance, management must determine that there will be sufficient taxable income to allow for the realization of deferred tax assets. Based upon historical and anticipated future losses, management has determined that the deferred tax assets do not meet the more likely than not threshold for realizability. Accordingly, a full valuation allowance has been recorded against the Company’s deferred tax assets as of December 31, 2024. The valuation allowance increased by $1.5 million during the year ended December 31, 2024. The Company does not have unrecognized tax benefits as of December 31, 2024 or 2023. The Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.

The Company had net operating loss (“NOL”) carryforwards for federal and state income tax purposes as follows (in thousands):

	December 31,
	2024		2023
Federal	$	203,490	$	205,212
State	$	62,819	$	63,566

The NOL carryforwards generated prior to 2018 began to expire for federal income tax purposes and begin expiring in 2030 for state income tax purposes. Federal and many state NOLs generated in 2018 and into the future now have an indefinite life.

The NOL carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. NOL carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code, respectively, as well as similar state provisions. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. To date, the Company has not performed an analysis to determine whether or not ownership changes have occurred since inception.

A reconciliation of income tax expense at the statutory federal income tax rate and income taxes as reflected in the consolidated financial statements is as follows:

	Year Ended December 31,
	2024			2023
Federal tax expense at statutory rate		21.00	%		21.00	%
State tax, net of federal benefit		(0.12	)%		0.18	%
Permanent differences		(1.15	)%		(1.89	)%
Other difference and true ups		(3.13	)%		(8.07	)%
Change in valuation allowance		(14.94	)%		(10.38	)%
Effective income tax rate		1.66	%		0.84	%

On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022 (“IRA”). The IRA contains certain tax measures, including a corporate alternative minimum tax of 15% on some large corporations and an excise tax of 1% on corporate stock repurchases. The provisions of the IRA did not have an impact on the Company’s consolidated financial statements for the year ended December 31, 2024, as the Company currently does not qualify as a large corporation for the 15% alternative minimum tax and there were no stock repurchases during 2023. The Company will monitor its operations for changes that could impact the applicability of the IRA provisions in future tax years.