Income Taxes

12 Months Ended

Dec. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The provision for income taxes for the years ended December 31, 2024 and 2023 is summarized as follows:

	Year Ended December 31,
(In thousands)	2024		2023
Current:
Federal	$	—	$	—
State	305		—
	$	305	$	—
Deferred:
Federal	—		—
State	—		—
	$	—	$	—
Total	$	305	$	—

A reconciliation of income taxes computed at the statutory federal income tax rate to income taxes as reflected in the financial statements is summarized as follows:

	Year Ended December 31,
	2024		2023
Federal income tax expense at statutory rate	(21.0)	%	(21.0)	%
State income tax, net of federal benefit	(5.2)		(5.5)
Permanent differences	2.3		10.8
Change in state tax rate	(1.3)		(0.3)
Changes of state net operating losses	—		0.3
Change in stock options and restricted stock	—		12.7
Change in valuation allowance	23.9		2.7
Federal to state differences	(1.7)		—
Other	(0.5)		0.3
Effective tax rate	(3.5)	%	0.0	%

The Company's deferred tax assets and liabilities for the years indicated are summarized below:

	December 31,
(In thousands)	2024		2023
Deferred tax assets:
Net operating loss carryforward	$	35,224	$	36,735
Stock options and restricted stock	3,849		4,484
Inventory reserve	185		343
Allowance for doubtful accounts	25		18
Accrued expenses	1,746		2,194
Research and development expense	2,507		1,666
Deferred revenue	676		878
Leasehold improvements and equipment	124		99
Intangibles	102		105
Operating leases	238		227
	44,676		46,749
Less: Valuation allowance	(44,290)		(46,391)
Total deferred tax assets	386		358
Deferred tax liabilities:
Prepaid expenses	(386)		(358)
Total deferred tax liabilities	(386)		(358)
Net deferred tax assets (liabilities)	$	—	$	—

For the year ended December 31, 2024, the Company’s effective tax rate was 3.5%. The Company reduced its valuation allowance by approximately $2.1 million, to $44.3 million as of December 31, 2024 from $46.4 million as of December 31, 2023. For the year ended December 31, 2023, the Company maintained a full valuation allowance against the entire deferred income tax balance which resulted in an effective tax rate of 0%. For the years ended December 31, 2024 and 2023, the Company identified $36,750 and $106,000, respectively, in U.S. taxable income on global intangible low-taxed income (GILTI).

As of December 31, 2024, the Company’s net operating loss (NOL) carryforwards for federal and state income tax purposes are approximately $133.3 million and $107.9 million, respectively, portions of which were reduced in the year ended December 31, 2024 for both federal and state. During the year ended December 31, 2024, $7.6 million of federal NOL carryforwards and $1.7 million of state NOL carryforwards were reduced against taxable income. The Company’s federal NOL carryforward of $103.6 million generated in tax years beginning after December 31, 2017 may be carried forward indefinitely but the deductibility of such NOL carryforwards in taxable years beginning after December 31, 2017, is limited to 80% of taxable income.

Section 382 of the Internal Revenue Code of 1986, as amended (the “IRC”), generally imposes an annual limitation on the amount of NOL carryforwards and associated built-in losses that may be used to offset taxable income when a corporation has undergone certain changes in stock ownership. The Company’s ability to utilize NOL carryforwards and built-in losses may be limited, under this section or otherwise, by the Company’s issuance of common stock or by other changes in stock ownership. The Company has not performed an analysis of IRC Section 382 recently due to net operating losses, dating back to 2004. The Company will continue to analyze the potential impact of any additional transactions undertaken upon the utilization of the net operating losses on a go forward basis. To the extent the Company’s use of NOL carryforwards and associated built-in losses is significantly limited in the future due to additional changes in stock ownership, the Company’s income could be subject to U.S. corporate income tax earlier than it would if the Company were able to use NOL carryforwards and built-in losses without such annual limitation, which could result in lower profits and the loss of the majority of the benefits from these attributes.

During the first quarter of 2024, the Company was notified that it was selected for examination by the IRS for its federal income tax return for the fiscal year 2021 period. The examination was completed in the third quarter of 2024, with no changes recommended. The Company is currently not under examination by the Internal Revenue Service or any other major income tax jurisdiction. The Company has not identified any material uncertain tax positions requiring a reserve as of December 31, 2024 and December 31, 2023.