v3.26.1
Income Tax
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Tax Income Tax
The following table summarizes the components of the provision for (benefit from) income tax (in thousands):
Year Ended December 31,
20252024
Current:
Federal$— $— 
State— — 
Total current taxes— — 
Deferred:
Federal2,711 2,313 
State612 358 
Total deferred taxes3,323 2,671 
Other:
Valuation allowance(7,497)(6,506)
Provision for (benefit from) income taxes$(4,174)$(3,835)
The following table presents a reconciliation of the statutory federal income tax rate to the Company's effective income tax rate (in thousands):
Year Ended December 31,
20252024
$%$%
Statutory rate $2,704 21.00 %$2,252 21.00 %
State income taxes—net of federal benefit (1)
(770)(5.98)%(608)(5.67)%
Change in valuation allowance (6,117)(47.50)%(5,404)(50.39)%
Nontaxable or nondeductible items:
    Sec. 162(m) compensation disallowance167 1.30 %96 0.90 %
    Stock compensation(252)(1.96)%(131)(1.23)%
    Other94 0.73 %(40)(0.38)%
Effective tax rate$(4,174)(32.41)%$(3,835)(35.77)%
(1)
State taxes in Virginia made up the majority (greater than 50%) of the tax effect in this category.
The Company's effective tax rates for the years ended December 31, 2025 and 2024 differ from the U.S. federal statutory tax rate of 21%, primarily due to state income taxes and the impact of valuation allowance releases related to projected increases in future period income forecasts.
The following table summarizes changes in the Company's deferred tax valuation allowance balance (in thousands):
Year Ended December 31,
20252024
Valuation allowance - Beginning balance$(17,146)$(23,666)
Valuation allowance release7,497 6,506 
Adjustment from impact of blended tax rate— 14 
Valuation allowance - Ending balance$(9,649)$(17,146)
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company has recorded valuation allowances for certain tax attributes and deferred tax assets due to the existence of sufficient uncertainty regarding the future realization of those deferred tax assets through future taxable income. Based on its recent financial performance and current forecasts of future operating results, the Company conducts a quarterly analysis to determine if it is more likely than not that a portion of the deferred tax assets related to its net operating loss carryforwards will be utilized in future periods. The Company's effective tax rate in any given period is directly impacted by the timing and magnitude of any partial valuation allowance releases.
The following table summarizes the components of the Company's deferred tax assets and liabilities (in thousands):
December 31,
20252024
Deferred tax assets:
Net operating loss and tax credit carryforwards$24,839 $28,589 
Stock-based compensation684 538 
Investments in affiliates990 1,420 
Right of use lease liability1,377 1,615 
Bonus accrual1,987 1,277 
Other 2 — 
Valuation allowance(9,649)(17,146)
Total deferred tax assets$20,230 $16,293 
Deferred tax liabilities:
Right of use lease asset$(1,288)$(1,523)
Depreciation and amortization(48)(50)
Total deferred tax liabilities$(1,336)$(1,573)
Net deferred income tax assets (liabilities)$18,894 $14,720 
As of December 31, 2025, the Company had $96.5 million of net operating loss (“NOL") carryforwards. These NOLs, if unused, will begin expiring in 2028. Under Code Section 382 (“Section 382”) rules, if a change of ownership is triggered, the Company’s NOL assets and possibly certain other deferred tax assets may be impaired. Given Section 382’s broad definition, an ownership change could be the unintended consequence of otherwise normal market trading in the Company’s stock that is outside of the Company’s control. In an effort to preserve the availability of these NOLs, the Company has adopted a Section 382 rights agreement that is scheduled to expire on March 28, 2035. The Section 382 rights agreement helps to reduce the likelihood of an unintended “ownership change”, thus preserving the value of these future tax benefits. We estimate that as of December 31, 2025, the three-year cumulative shift in ownership of the Company’s stock had not triggered a limitation in the use of our NOL asset.
As of December 31, 2025, there were no uncertain tax positions that, if recognized, would affect the Company's effective tax rate. We file U.S. and state income tax returns in jurisdictions with varying statutes of limitations. All of our income tax returns remain subject to examination by federal and state tax authorities due to the availability of our NOL carryforwards.
In July 2025, the U.S. government enacted budget reconciliation legislation known as the One Big Beautiful Bill Act of 2025, which included a broad range of tax reform provisions affecting businesses, including extending and modifying certain key Tax Cuts & Jobs Act provisions (both domestic and international), expanding certain Inflation Reduction Act incentives while accelerating the phase-out of others. The provisions of the legislation have multiple effective dates, with certain provisions effective starting in 2025 and others being implemented up through 2027. The impact to the Company’s income tax expense and effective tax rate for the year ended December 31, 2025 associated with this legislation is immaterial.