Annual report [Section 13 and 15(d), not S-K Item 405]

Provision for Income Taxes

v3.25.4
Provision for Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Provision for Income Taxes Provision for Income Taxes
The Company is subject to U.S. federal, state, and local corporate income taxes.
Upon adoption of ASU 2023-09, Improvements to Income Tax Disclosures, as described in Note 2, Summary of Significant Accounting Policies, the Company’s effective income tax rate reconciliation for the year ended December 31, 2025 was as follows:
(in thousands, except for percentages)
Federal statutory rate $ (2,453) 21.0  %
Domestic federal
Tax credits
Foreign tax credits (10) 0.1  %
Nontaxable or nondeductible items, net (141) 1.2  %
Stock-based compensation 1,529  (13.1) %
Changes in valuation allowances 1,080  (9.3) %
Domestic state and local income taxes, net of federal effect 18  (0.2) %
Foreign tax effects - China 10  (0.1) %
Provision for income taxes $ 33  (0.3) %
The Company’s effective income tax rate reconciliation for the year ended December 31, 2024 in accordance with the guidance prior to the adoption of ASU 2023-09 was as follows:
Federal statutory rate 21.0  %
State income taxes, net of federal tax benefit (0.1) %
Stock-based compensation (11.7) %
Remeasurement of derivative liabilities 7.6  %
Other (0.6) %
Change in valuation allowance (16.3) %
Provision for income taxes (0.1) %
The components of net deferred tax assets are as follows for the periods presented (in thousands):
December 31,
2025 2024
Deferred tax assets:
Net operating loss carryforwards $ 134,244  $ 131,563 
Deferred revenue 1,179  1,546 
Inventory write-downs and uniform capitalization 752  873 
Operating lease liabilities 3,155  3,557 
Accruals and other reserves 379  729 
Stock-based compensation 2,243  4,107 
Business interest carryforwards 10,057  10,127 
Depreciation and amortization 393  817 
Other 162  223 
Total deferred tax assets 152,564  153,542 
Less: valuation allowance (150,240) (150,486)
Total deferred tax assets, net of valuation allowance 2,324  3,056 
Deferred tax liabilities:
Operating lease right-of-use assets (2,324) (3,056)
Total deferred tax liabilities (2,324) (3,056)
Net deferred tax assets $ —  $ — 
On July 4, 2025, the 2025 budget reconciliation bill, officially known as the One Big Beautiful Bill Act of 2025 (the “Act”), was enacted into law. The Act includes a broad range of tax reforms such as the extension of so-called permanently restoring bonus depreciation allowances, permanent changes in the limitations for deducting business interest expense and permanent expensing of domestic research and development costs. The Company has evaluated the provisions of the Act and determined that, because it maintains a full valuation allowance against its deferred tax assets, the Act does not have a material impact on the Company’s condensed consolidated financial statements or effective tax rate.

For the applicable periods all tax cash payments were immaterial and are therefore not being separately disclosed.
Net Operating Loss Carryforwards
As of December 31, 2025, the Company had federal and state net operating loss (“NOL”) carryforwards of $577.2 million and $255.1 million, respectively. Federal NOL carryforwards $552.2 million have no expiration and can only be used to offset 80% of the Company’s future taxable income. The state NOL carryforwards include $219.5 million with definitive expiration dates and $35.6 million with no expiration. The state NOLs are presented as an apportioned amount.
Valuation Allowance
The realization of deferred tax assets is based on historical tax positions and estimates of future taxable income. We evaluate both the positive and negative evidence that we believe is relevant in assessing whether we will realize the deferred tax assets. A valuation allowance is recorded when it is more likely than not that some portion of the deferred tax assets will not be realized. To the extent that a valuation allowance has been established and it is subsequently determined that it is more likely than not that the deferred tax assets will be recovered, the valuation allowance will be released.
The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. We consider the scheduled reversal of deferred tax liabilities (including the effect of available carryback and carryforward periods), as well as projected pre-tax book income in making this assessment. To fully utilize the NOL and tax credits carryforwards we will need to generate sufficient future taxable income in each respective jurisdiction.
The following summarizes the activity related to valuation allowances on deferred tax assets for the periods presented:
December 31,
2025 2024
Valuation allowance, as of beginning of year $ 150,486  $ 145,711 
Valuation allowance established 1,041  5,346 
Changes to existing valuation allowances (1,287) (571)
Valuation allowance, as of end of year $ 150,240  $ 150,486 
Uncertain Tax Positions
During the years ended December 31, 2025 and 2024, the Company did not record any uncertain tax positions and the balances of unrecognized tax positions were nominal. The Company did not record any interest and penalties related to uncertain tax positions in its provision for income taxes.
The Company files income tax returns in the U.S. federal and various state and local jurisdictions. The Company has no ongoing tax examinations by the U.S. income tax authorities at this time.