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INCOME TAXES
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
Table 15.1: Components of Provision for Income Taxes
For the Year Ended December 31,
20242023
(in thousands)
Current provision
Federal$— $— 
State21 (19)
Foreign5 — 
Total current26 (19)
Deferred tax expense
Federal46 32 
State(46)23 
Total deferred— 55 
Provision for income taxes$26 $36 
Table 15.2: Reconciliation of Statutory Tax Rate to Actual Tax Rate
For the Year Ended December 31,
20242023
Computed expected income tax provision21.0 %21.0 %
State income taxes, net of federal income tax benefit3.3 3.6 
Change in valuation allowance for deferred tax assets(23.1)7.5 
Cumulative deferred adjustments1.0 — 
Provision to return adjustments— (0.1)
Other permanent differences(0.1)(0.2)
Stock-based compensation(0.7)(41.2)
Section 162(m) limitation - covered employees(3.9)9.5 
Uncertain tax positions(0.5)0.5 
R&D credit2.9 (0.7)
Effective tax rate(0.1 %)(0.1 %)
Table 15.3: Components of Deferred Tax Assets and Liabilities
As of December 31,
20242023
(in thousands)
Deferred tax assets:
Accounts receivable, principally due to allowance for doubtful accounts$14 $70 
Allowance for inventory obsolescence and amortization60 203 
Accrued liabilities not currently deductible763 1,133 
Stock-based compensation2,734 1,352 
Accrued compensation783 2,457 
Lease liabilities2,594 2,906 
Goodwill28,122 30,947 
Capitalized research and development costs10,116 2,992 
Net operating loss carryforwards - federal15,101 8,402 
Net operating loss carryforwards - state2,672 1,522 
R&D tax credit4,856 3,647 
Amortization and depreciation— 252 
Total gross deferred tax assets67,815 55,883 
Less valuation allowance(67,117)(54,999)
Total deferred tax assets, net of valuation allowance698 884 
Deferred tax liabilities:
Right-of-use assets(1,510)(1,697)
Amortization and depreciation(1)— 
Total deferred tax liabilities(1,511)(1,697)
Net deferred tax liabilities$(813)$(813)
Table 15.4: Valuation Allowance Activity
For the Year Ended December 31,
20242023
(in thousands)
Balance at beginning of year$54,999 $57,559 
Additions (reductions) 12,118 (2,560)
Balance at end of year$67,117 $54,999 
We establish a valuation allowance for deferred tax assets if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The realization of deferred tax assets is dependent upon the generation of future taxable income. We considered projected future taxable income, tax planning strategies, and reversal of taxable temporary differences in making this assessment.
Based on available evidence, we have determined that a valuation allowance is required as of December 31, 2024, and 2023 against the net of our deferred tax assets and liabilities to the extent that only a deferred tax liability related to indefinite-lived goodwill remains on our consolidated balance sheets on December 31, 2024, and 2023.
On December 31, 2024, for federal income tax purposes, there was approximately a $71.9 million net operating loss available to be carried forward to offset future taxable income. Approximately $10.6 million of these net operating loss carryforwards expire in 2037, the remaining will be carried forward indefinitely. As of December 31, 2024, there was approximately $6.1 million of R&D credit carryover which begins to expire in 2033. Certain tax attributes of the Company, including net operating losses and credits, would be subject to a limitation should an ownership change as defined under Section 382 of the Internal Revenue Code of 1986, as amended, occur. The limitations resulting from a change in ownership could affect the Company's ability to utilize its tax attributes. A study was completed in 2020 which confirmed that no limitation applies to the Company's tax attributes as of December 31, 2020. We believe that ownership activity since December 31, 2020, would not result in limitation sufficient to result in the expiration of unused attributes.
Under the provisions of ASC 740, we determined that there were approximately $1.5 million and $1.2 million of unrecognized tax benefits as of December 31, 2024, and 2023, respectively. There was no tax benefit included on the unrecognized tax benefits as of December 31, 2024. There was $0.01 million of tax benefits included in the balance of unrecognized tax benefits as of December 31, 2023, that if recognized, would impact the effective tax rate. Also included in the balance of unrecognized tax benefits as of December 31, 2024, and 2023 were $1.5 million and $1.2 million, respectively, of tax benefits that, if recognized, would not impact the effective tax rate due to the Company's valuation allowance. We report interest and penalties as a component of income tax expense. There was no accrued interest and penalties related to the unrecognized tax benefits as of December 31, 2024. The Company had accrued interest and penalties related to the unrecognized tax benefits of $0.01 million, which was recorded in other liabilities as of December 31, 2023. We believe that the total amounts of unrecognized tax benefits will not significantly increase or decrease within the next 12 months. The period for which tax years are open with regards to unrecognized tax benefits, 2013 to 2024, has not been extended beyond the applicable statute of limitations.
We file income tax returns in the U.S. federal jurisdiction and are subject to the continuous examination of our income tax returns by the Internal Revenue Service ("IRS") and other tax authorities. The applicable statute of limitations is no longer open for audit or examination for the years before 2021 for federal income taxes in the U.S. We were notified by the IRS in September 2024 regarding an audit of our 2021 federal income tax return. As of the date of these financial statements, the audit is still ongoing and no final determination or audit report has been issued.
Table 15.5: Reconciliation of the Beginning and Ending Amounts of Unrecognized Tax Benefit
For the Year Ended December 31,
20242023
(in thousands)
Balance at beginning of year$1,228 $1,357 
Increase (decrease) in prior year tax positions123 (169)
Increase related to current year tax positions177 131 
Decrease related to lapse of statutes(13)(91)
Balance at end of year$1,515 $1,228