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

INCOME TAXES

v3.26.1
INCOME TAXES
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES
NOTE 16—INCOME TAXES
The components of income (loss) before income taxes were as follows:
Years Ended December 31,
(in thousands)
 2025 2024
United States $ (29,928) $ (31,268)
Foreign 3,227  3,980 
Total loss $ (26,701) $ (27,288)
The provision for income taxes consisted of the following:
Years Ended December 31,
(in thousands)
2025 2024
Current tax expense:
Federal $ 360  $ (11)
State 304  710 
Foreign 1,513  2,071 
Total current tax expense $ 2,177  $ 2,770 
Deferred tax expense:
Federal $ 42  $ (634)
State (526) 364 
Foreign 245  (1,101)
Total deferred tax expense $ (239) $ (1,371)
Provision for Income Taxes $ 1,938  $ 1,399 
The following is a reconciliation between the U.S. federal statutory tax rate and our effective tax rate for the current year, expressed in thousands and as a percentage of pre-tax income:
December 31,
2025
(in thousands)
Amount
Percent
Tax expense (benefit) computed at U.S. federal statutory rate $ (5,607) 21.0  %
State and Local Income Taxes, Net of Federal Income Tax Effect (1)
(78) 0.3 
Foreign tax effects
Israel:
Stock-based compensation(2)
611  (2.3)
Other 235  (0.9)
Other foreign jurisdictions 558  (2.1)
Effects of cross-border tax laws
Foreign branch income
 582  (2.2)
Deduction for foreign taxes
 (281) 1.1 
Other effects 122  (0.5)
Tax credits:
R&D tax credits (160) 0.6 
Changes in valuation allowance 3,974  (14.9)
Nontaxable or nondeductible items:
Stock-based compensation(2)
1,683  (6.3)
Section 162(m) - executive compensation 284  (1.1)
Other nontaxable or nondeductible items 277  (1.0)
Changes in unrecognized tax benefits 7  — 
Other adjustments (269) 1.0 
Effective income tax rate $ 1,938  (7.3) %
(1)States that make up the majority (>50%) of state and local taxes are California, Texas, and Illinois.
(2)Stock-based compensation includes non-deductible equity compensation and tax effects of shortfalls and windfalls.

December 31,
2024
Statutory rate 21.0  %
Foreign provision (0.2)
State/province income tax 2.7 
Stock compensation (9.6)
Unrecognized tax benefits (0.1)
Research credit 2.5 
Return to provision
 5.8 
Other foreign branch impacts
 (4.6)
Valuation allowance (17.5)
Foreign-derived intangible income deduction (FDII) 0.2 
Global intangible low taxed income (GILTI) (0.5)
Non-deductible expenses-other (4.0)
Foreign branch income (3.1)
Foreign tax deduction 1.8 
Fair value adjustment on warrants 0.8 
Foreign tax settlement
 — 
Other (0.3)
Effective tax rate (5.1) %
The Company made income tax payments (net of refunds received) during the year ended December 31, 2025, as follows:
(in thousands)
Year Ended December 31, 2025
Federal $ — 
State 132 
Foreign:
Israel 920 
Serbia 363 
Singapore 152 
Other foreign jurisdictions
 (13)
Total cash paid for income taxes (net of refunds received) $ 1,554 
Deferred tax assets and liabilities consist of the following (in thousands):
December 31,
2025 2024
Deferred tax assets:
Net operating loss carryforwards $ 3,300  $ 2,941 
Tax credit carryforwards 1,884  2,545 
Accrued liabilities 2,990  3,782 
Stock compensation 5,113  5,954 
Charitable contribution 399  1 
Intangibles
 4,327  — 
Section 174 amortization(1)
14,663  15,671 
Operating lease liabilities 2,495  2,231 
Other
 182  84 
Total gross deferred tax assets $ 35,353  $ 33,209 
Less: Valuation allowance (27,911) (23,827)
Total deferred tax assets $ 7,442  $ 9,382 
Deferred tax liabilities:
Intangibles —  638 
Property and equipment 917  2,486 
Prepaid expenses 1,148  1,100 
Operating lease assets 1,816  2,140 
Other 37  — 
Total deferred tax liabilities $ 3,918  $ 6,364 
Deferred tax assets (liability), net $ 3,524  $ 3,018 
(1)Section 174 amortization for the year ended December 31, 2024 has been reclassified to conform to the current year presentation.
As of December 31, 2025, the Company had gross U.S. federal net operating losses of $6.1 million and tax credit carryforwards of $1.1 million. As of December 31, 2024, the Company had gross U.S. federal net operating losses of $5.1 million and tax credit carryforwards of $0.9 million. The Company’s federal net operating losses can be carried forward indefinitely. The federal research credits are limited to a 20-year carryforward period and will expire starting in 2041.
As of December 31, 2025, the Company had tax effected state net operating loss carryforwards of approximately $1.6 million, of which $0.1 million will carryforward indefinitely and $1.5 million will begin to expire between 2036 and 2044. The Company also had $4.6 million of state research credits, of which $0.5 million begin to expire in 2038 while the remaining are carried forward indefinitely.
After consideration of all positive and negative evidence, including scheduled reversals of deferred tax assets and liabilities, projected future taxable income, tax planning strategies, and results of recent operations, management determined that it is more likely than not that a portion of our deferred tax assets will not be realized. As a result, we recorded a valuation allowance of $27.9 million and $23.8 million as of December 31, 2025 and 2024, respectively. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased, or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for growth.
In July 2025, U.S. Congress enacted the One Big Beautiful Bill Act (“OBBBA”), which included a range of tax reform measures, including the extension and modification of certain provisions originally enacted under the Tax Cuts and Jobs Act. The OBBBA does not materially impact the Company’s effective tax rate or cash flows in the current fiscal year.
The following is a tabular reconciliation of the total amounts of unrecognized tax benefits:
Years Ended December 31,
2025 2024
Balance at beginning of period $ 525  $ 347 
Increases for tax positions of prior years —  170 
Increases for tax positions of current year 98  170 
Decreases for tax positions of prior years (68) (14)
Decreases for lapses in statute of limitations (77) $ (148)
Balance at end of period $ 478  $ 525 
The Company has analyzed filing positions in all of the federal, state, and foreign jurisdictions where it is required to file income tax returns and for all open tax years. As of December 31, 2025, the Company recorded approximately $0.5 million of unrecognized tax benefits, of which zero would impact the effective tax rate, if recognized. The Company’s policy for recording interest and penalties associated with audits and unrecognized tax benefits is to record such items as a component of income tax expense. As of December 31, 2025, there are no interest or penalties associated with the uncertain tax benefit as the entire balance relates to a reduction of a deferred tax asset not yet realized.
As of December 31, 2025, current and future earnings in the Company's foreign subsidiaries are not permanently reinvested. Earnings from these subsidiaries are subject to tax in their local jurisdiction, and withholding taxes in these jurisdictions are considered as distributions are made.
The Company is subject to taxation in the U.S. and various states and foreign jurisdictions. With few exceptions, the Company is subject to examination for both U.S. federal and state tax returns for the years 2022 to present. The tax years starting from 2022 remain open to examination by the Israeli Tax Authority. The tax years starting from 2020 remain open to examination by the Hong Kong Inland Revenue Department for Asia. For the remaining jurisdictions, the Company is subject to examination by tax authorities from the date the Company started operations in the respective foreign jurisdiction to present.