Note 13 - Income Taxes

12 Months Ended

Dec. 31, 2025

Notes to Financial Statements

Income Tax Disclosure [Text Block]

13. INCOME TAXES

Loss before provision for income taxes consisted of the following for the periods indicated (in thousands):

	December 31,			December 31,
	2025			2024
Domestic	$	(18,389	)	$	(11,896	)
International		(554	)		(13	)
Total	$	(18,943	)	$	(11,909	)

The components of the Company’s income tax provision were as follows for the periods indicated (in thousands):

	December 31,		December 31,
	2025		2024
Current:
Federal	$	—	$	—
State		41		37
Foreign		—		(79	)
Total current income tax expense		41		(42	)
Deferred:
Federal		—		—
State		—		—
Foreign		—		(5	)
Total deferred income tax benefit		—		(5	)
Total income tax benefit	$	41	$	(47	)

For the year ended December 31, 2025, we adopted ASU 2023-09 prospectively. A reconciliation of the U.S. federal statutory income tax rate to our effective tax rate pursuant to the disclosure requirements of ASU 2023-09 for the year ended December 31, 2025 is as follows (in thousands):

	December 31, 2025
	$			%
U.S. federal statutory tax rate	$	(3,978	)		21.0	%
State and local income taxes, net of federal income tax effects(1)		38			(0.2	)%
Foreign tax effects:
UK		113			(0.6	)%
Canada		—			—	%
Ireland		—			—	%
China		4			—	%
Effect of changes in tax laws or rates		—			—	%
Effect of cross-border tax laws		—			—	%
Tax credits		—			—	%
Changes in valuation allowances		2,932			(15.5	)%
Nontaxable or nondeductible items:
Stock based compensation		405			(2.1	)%
Other		32			(0.2	)%
Change in unrecognized tax benefits		—			—	%
Other adjustments:
Deferred true up - intangibles		596			(3.1	)%
Other		(101	)		0.5	%
Total income tax benefit	$	41			(0.2	)%

(1) The majority of the Company’s state and local income tax expense is attributable to operations in California, New York, New York City and Texas, which collectively represent more than 50% of the total state and local income tax rate reconciliation category. The Company files income tax returns in multiple state jurisdictions; however, its primary state tax exposure is concentrated in these jurisdictions due to the location of its operations and apportionment factors.

The reconciliation of taxes at the federal statutory rate to our provision for (benefit from) income taxes for the year ended December 31, 2024 in accordance with the guidance prior to the adoption of ASU 2023-09 was as follows:

	December 31, 2024
Income tax benefit at statutory rates	$	(2,501	)
Warrant liabilities		(177	)
Stock compensation		883
Other permanent differences		—
Foreign rate differential		(1	)
State income taxes, net of federal tax benefit		(311	)
Other		404
Prior year true-up adjustments		(2,194	)
Valuation allowance		3,850
Total income tax benefit	$	(47	)

The Company’s effective tax rate was (0.2)% and 0.4% for the years ended December 31, 2025 and December 31, 2024, respectively. The effective tax rate for 2025 was principally due to tax benefits incurred related to the operations of the Company's UK business, non-deductible executive stock compensation expense, and the change in the fair value of the warrant liabilities. The effective tax rate for 2024 was principally due to tax benefits incurred related to the operations of the Company's UK business, the change in fair value of the warrant liabilities, and true-up adjustments recorded in connection with the Company’s filed tax returns, primarily offset by the impact of non-deductible executive stock compensation expense and changes in the valuation allowance.

The Company’s deferred tax assets and liabilities as of the dates indicated were as follows (in thousands):

	December 31, 2025			December 31, 2024
Deferred tax assets:
Allowance for credit losses	$	—		$	35
Inventory Reserve		455			325
Other Accruals		—			320
Accrued Bonus		—			618
Net operating loss carryforwards		65,734			58,459
Stock options		554			567
Interest expense limitation		11,548			11,058
Intangibles (definite life)		9,781			8,909
Intangibles (indefinite life)		16,882			19,669
Other		1,694			2,211
Total deferred tax assets before valuation allowance		106,648			102,171
Valuation allowance		(106,221	)		(101,890	)
Net deferred tax assets		427			281
Deferred tax liabilities:
Prepaid expenses		(419	)		(281	)
Depreciation		(5	)		—
Other		(3	)		—
Net deferred tax liabilities		(427	)		(281	)
Deferred tax liability, net	$	—		$	—

For the year ended December 31, 2025, we adopted ASU 2023-09 prospectively. The amount of cash income taxes paid by the Company were as follows (in thousands):

	December 31, 2025
Federal	$	—
State and local:
New Jersey		5
Texas		40
Other		5
Foreign:
United Kingdom		—
Canada		—
Ireland		—
China		—
Income taxes paid, net	$	50

For the year ended December 31, 2024, cash income taxes paid by the company were $0.2 million.

The Company has temporary differences due to differences in recognition of revenue and expenses for tax and financial reporting purposes, principally related to net operating losses, inventory, depreciation, and other expenses that are not currently deductible or realizable. As of December 31, 2025, the Company had federal net operating loss carryforwards of approximately $269.3 million, $31 million of which, if not utilized, begin to expire in 2034 and approximately $237.9 million can be carried forward indefinitely but are limited to 80% of Federal taxable income. The Company also had state and local net operating losses of $200.8 million that expire between 2026 and 2036, depending on the state, if not used. As of December 31, 2024, the Company had federal net operating loss carryforwards of approximately $241.7 million, $31.1 million of which, if not utilized, begin to expire in 2034 and approximately $210.6 million can be carried forward indefinitely but are limited to 80% of Federal taxable income. The Company also had state and local net operating losses of $150.3 million that expire between 2035 and 2044, depending on the state, if not used. The Company’s ability to utilize its NOL carryforwards may be limited pursuant to Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), if the Company has had a change in ownership of more than 50% of its capital stock over a three-year period pursuant to Section 382 of the Code. These complex changes of ownership rules generally focus on ownership changes involving stockholders owning directly or indirectly 5% or more of a company’s stock, including certain public “groups” of stockholders as set forth by Section 382 of the Code, including those arising from new stock issuances and other equity transactions.

In response to COVID-19, various governments worldwide have enacted, or are in the process of enacting, measures to provide relief to businesses negatively affected by the pandemic. On March 27, 2021, the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was signed into law in the U.S. The CARES Act provides relief to U.S. corporations through financial assistance programs and modifications to certain payroll and income tax provisions. In connection with the CARES Act and other financial relief measures worldwide, the Company received $1.3 million of payroll related credits, of which $0.6 million has been utilized during the year ended December 31, 2025, with the remaining credits to be utilized over the next two years. The payroll related credits are recorded in accrued and other current liabilities within the consolidated balance sheets.

The Company regularly assesses the realizability of its deferred tax assets and establishes a valuation allowance if it is more-likely-than-not that some portion of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Due primarily to the Company’s history of net operating losses, the Company believes it is more likely than not its federal, state and foreign deferred tax assets will not more likely than not be realized as of December 31, 2025. Accordingly, the deferred tax assets have been fully offset by a valuation allowance. The valuation allowance for the year ended  December 31, 2025 increased by $4.3 million.

The Company’s major taxing jurisdictions are New Jersey, New York, New York City, Florida, Texas, Pennsylvania, Tennessee, Virginia, California, and the United Kingdom. The Company files a U.S. Consolidated income tax return as well as tax returns in certain foreign jurisdictions. The Company is subject to examination in these jurisdictions for all years since inception. Fiscal years outside the normal statute of limitations remain open to audit due to tax attributes generated in the early years which have been carried forward and may be audited in subsequent years when utilized. The Company is currently under examination by the Internal Revenue Service for its 2023 federal income tax return. The Company may be subject to audits covering a variety of tax matters by taxing authorities in any taxing jurisdiction where the Company conducts business. While the Company believes that the tax returns filed, and tax positions taken are supportable and accurate, some tax authorities may not agree with the positions taken. This can give rise to tax uncertainties which, upon audit, may not be resolved in the Company’s favor. As of December 31, 2025 and 2024, the Company has not recorded any tax contingency accruals for uncertain tax positions.

The Company had no unrecognized tax benefits as of December 31, 2025 and 2024.