Income taxes (Tables)

12 Months Ended

Dec. 31, 2025

The components of our loss before income taxes are as follows:

	Year Ended December 31,
(In thousands)	2025			2024
Domestic	$	(1,261	)	$	(3,981	)
Foreign		177			413
Loss before income taxes	$	(1,084	)	$	(3,568	)

Components of income tax expense

The components of the income tax expense are as follows:

	December 31,
(In thousands)	2025		2024
Current:
Federal	$	–	$	(154	)
State		53		37
Foreign		103		108
		156		(9	)
Deferred:
Federal		–		5,991
State		–		293
Foreign		–		20
		–		6,304
Income tax expense	$	156	$	6,295

Income taxes paid (net of refunds)

We paid the following amount of income taxes (net of refunds received) disaggregated by federal, state and foreign jurisdictions:

	December 31,
(In thousands)	2025		2024
U.S. Federal	$	–	$	360
State:
Connecticut		25		–
Texas		12		22
New York		–		22
All other		8		16
State Subtotal		45		60
Foreign:
United Kingdom		117		79
Foreign Subtotal		117		79
Total cash paid for income taxes, net of refunds	$	162	$	499

Deferred tax assets and liabilities

Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the Consolidated Financial Statements. Our deferred tax assets and liabilities were comprised of the following:

	December 31,
(In thousands)	2025			2024
Deferred tax assets:
Federal net operating losses	$	3,545		$	276
Foreign net operating losses		870			802
State net operating losses		221			135
Accrued severance		12			20
Capitalized R&D expenses		–			3,708
Inventory reserves		1,086			1,047
Deferred revenue		13			7
Warranty reserve		31			29
Stock compensation expense		1,043			853
Other accrued compensation		496			165
R&D credit carryforward		1,217			903
Other Assets		425			379
Gross deferred tax assets		8,959			8,324
Valuation allowance		(8,664	)		(8,103	)
Net deferred tax assets		295			221

Deferred tax liabilities:
Depreciation and amortization		251			179
Other		44			42
Net deferred tax liabilities		295			221
Total net deferred tax assets	$	–		$	–

Valuation allowance on deferred tax assets

As of December 31, 2025 and 2024, we had $8.7 million and $8.1 million, respectively, of valuation allowance against our deferred income tax assets. The following table summarizes the activity recorded in the valuation allowance on the deferred tax assets:

	Year Ended December 31,
(In thousands)	2025			2024
Balance, beginning of period		$	8,103		$	719
Additions charged to income tax provision			561			7,384
Balance, end of period		$	8,664		$	8,103

Statutory to effective tax rate reconciliation

Differences between the U.S. statutory federal income tax rate and our effective income tax rate are analyzed below:

	2025					2024
(Dollars in thousands)	$			%		$			%
Loss before income taxes	$	(1,084	)			$	(3,568	)

U.S. Federal Statutory Tax Rate		(228	)	21.0	%		(749	)	21.0	%
Current State and Local Income Taxes, net of Federal Income Tax Effect		57		(5.3	%)		(36	)	1.0	%

Foreign Tax Effects
United Kingdom – statutory rate differences		(1	)	–			17		(0.5	%)
Macau – change in valuation allowance		68		(6.3	%)		–		–

Effect of changes in Tax Laws or Rates Enacted in the Current Period		–		–			–		–

Effect of Cross-Border Tax Laws		–		–			–		–

Tax Credits		(313	)	28.9	%		(313	)	8.8	%

Nontaxable or Nondeductible Items
Share based payment awards		36		(3.3	%)		27		(0.8	%)
Stock Option cancellations		56		(5.2	%)		74		(2.1	%)
Meals and entertainment		12		(1.1	%)		–		–

Changes in Valuation Allowance		450		(41.5	%)		7,384		(206.9	%)

Other Adjustments
Resolution of uncertain tax positions		(16	)	1.5	%		–		–
Net operating losses		31		(2.8	%)		–		–
Research and development credit carryforward		–		–			(99	)	2.7	%
Other		4		(0.3	%)		(10	)	0.4	%

Effective Tax Rate	$	156		(14.4	%)	$	6,295		(176.4	%)

Unrecognized tax benefits

We had $187 and $203 thousand of total gross unrecognized tax benefits at December 31, 2025 and 2024, respectively that, if recognized, would favorably affect the effective income tax rate in any future periods. We are not aware of any events that could occur within the next twelve months that could cause a significant change in the total amount of unrecognized tax benefits. A tabular reconciliation of the gross amounts of unrecognized tax benefits at the beginning and end of the year is as follows:

	December 31,
(In thousands)	2025			2024
Balance, beginning of period	$	203		$	197
Tax positions taken during the current period		25			31
Reductions for tax positions in prior years		(41	)		(25	)
Balance, end of period	$	187		$	203