Income Taxes

12 Months Ended

Dec. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

13. Income Taxes

The source of income before income taxes are as follows:

(in thousands)	2024			2023
Domestic	$	(5,781	)	$	(5,535	)
Foreign		349			—
	$	(5,432	)	$	(5,535	)

Our income tax (benefit) expense is comprised of the following:

	For the Years Ended December 31,
(in thousands)	2024			2023
Current:
Federal	$	—		$	—
State		6			7
Foreign		10
Total current		16			7
Deferred:
Federal		(128	)		49
State		7			4
		70
Total deferred		(50	)		53
Income tax (benefit) expense	$	(34	)	$	60

The income tax (benefit) expense differs from the tax expense that would result by applying the statutory federal income tax rate to loss before taxes is due to the following:

	For the Years Ended December 31,
(in thousands)	2024			2023
Expected federal income tax benefit at statutory rate   of 21% in 2024 and 2023	$	(1,141	)	$	(1,163	)
Effect of permanent other differences		1			(359	)
Goodwill		(645	)		—
Return to provision adjustments		(60	)		(123	)
State income tax expense (benefit), net of federal benefit tax assets		560			(6	)
Valuation allowance		883			1,711
Other		369
Income tax (benefit) expense	$	(34	)	$	60

Deferred income taxes reflect 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. The components of the net deferred income tax assets (liabilities) are as follows:

	As of December 31,
(in thousands)	2024			2023
Deferred tax assets:
Net operating loss carryforward	$	18,254		$	17,852
Long-term lease		1,127			1,284
Stock-based compensation		888			1,246
Equity method investment		839			816
Other		654			251
Tax credits		296			300
Legal accrual		—			172
Deferred tax assets before valuation allowance		22,057			21,921
Valuation allowance		(18,710	)		(17,826	)
Deferred tax assets, net of valulation allowance		3,348			4,095
Deferred tax liabilites:
Depreciation and amortization		(2,516	)		(3,231	)
Right of use lease asset		(1,262	)		(1,415	)
Deferred Revenue		(70	)
Total deferred tax liabilites		(3,848	)		(4,646	)
Net deferred tax asset/(liability)	$	(501	)	$	(551	)

Periodically, we perform assessments of the realization of our net deferred tax assets considering all available evidence, both positive and negative. We determined that a valuation allowance against our deferred tax assets of $18.7 million and $17.8 million for 2024 and 2023, respectively, was necessary due to the cumulative loss incurred over a four-year period. We have federal and state net operating loss carryforwards of approximately $83.9 million and $29.5 million, respectively, of which $7.8 million in federal net operating losses expire after 2037. Net operating losses generated in 2018 and beyond do not expire. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) is a stimulus bill which was in response to economic consequences of the COVID-19 pandemic. The CARES Act provided an employee retention credit, which is a refundable tax credit against certain employment taxes. During the second half of 2023, we recorded $1.75 million related to the employee retention credit in Selling and operating expenses in the consolidated statements of operations with a related receivable balance from the United States government related to the CARES Act, which is recorded in Prepaid expenses and other current assets on our consolidated balance sheets.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. We measure the tax benefits recognized in the consolidated financial statements from such a position based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and are often ambiguous. As such, we are required to make many subjective assumptions and judgments regarding our income tax exposures. Interpretations of and guidance surrounding income tax law and regulations change over time and may result in changes to our subjective assumptions and judgments which can materially affect amounts recognized in our consolidated balance sheets and consolidated statements of operations.

The result of our assessment of our uncertain tax positions did not have a material impact on our consolidated financial statements. Our federal and state tax returns for all years after 2015 are subject to future examination by tax authorities for all our tax jurisdictions. We recognize interest and penalties related to income tax matters in interest and other income (expense) and corporate, general and administrative expenses, respectively.

We operate in a number of tax jurisdictions and are subject to examination of its income tax returns by tax authorities in those jurisdictions who may challenge any item on these returns. Because the tax matters challenged by tax authorities are typically complex, the ultimate outcome of these challenges is uncertain In accordance with ASC Topic 740, we recognize the benefits of uncertain tax positions in our consolidated financial statements only after determining that it is more likely than not that the uncertain tax positions will be sustained.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

(in thousands)
Balance at January 1, 2024	$	—
Additions for tax positions related to the current year		50
Balance at December 31, 2024	$	50

In the normal course of business, we are subject to examination by taxing authorities in U.S. Federal and U.S. state jurisdictions. The period subject to examination for our federal return is tax year 2019 and later. We believe that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in our tax audits are resolved in a manner not consistent with management's expectations, we could be required to adjust the provision for income tax in the period such resolution occurs.