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

Income Taxes

v3.25.4
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of loss from continuing operations before income taxes were:

For the Years Ended
December 31,
2025		 December 31,
2024
United States $ (20,066) $ (16,161)

The Company follows the provisions of the accounting guidance on accounting for income taxes which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is provided to reduce the deferred tax asset to a level which, more likely than not, will be realized.
A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to income (loss) from continuing operations before income taxes after the adoption of ASU 2023-09 is as follows:
For the Year Ended December 31, 2025
Amount Percent
Loss from continuing operations before income taxes $ (20,066)
U.S. federal statutory tax rate (4,214) 21.0  %
Changes in valuation allowances 2,750  (13.7) %
Nontaxable or nondeductible items:
Warrant liability (898) 4.5  %
Executive compensation 2,149  (10.7) %
Other 213  (1.1) %
Effective tax rate $ —  —  %
A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to income (loss) from continuing operations before income taxes for the year prior to the adoption of ASU 2023-09 is as follows:
For the Year Ended December 31, 2024
U.S. federal statutory tax rate 21.0  %
State & local income taxes, net of federal income tax effect (4.3) %
Executive compensation (9.6) %
Equity compensation (16.7) %
Other 0.5  %
Changes in valuation allowances 9.1  %
Effective tax rate —  %
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets were as follows:
As of December 31,
2025 2024
Deferred tax assets:
Net operating loss carryforwards $ 22,447  $ 22,552 
Stock-based compensation 449  243 
Capitalized research expenses —  2,318 
Research and development credits 978  981 
Operating lease liability 891  2,492 
Accrued expenses 680  772 
Other 130  704 
Total deferred tax assets 25,575  30,062 
Deferred tax liabilities:
Property and equipment (1,715) (422)
Amortization of intangibles (1,629) (1,589)
Sale of passenger business (2,501) — 
Operating right-of-use asset (837) (2,370)
Total deferred tax liabilities (6,682) (4,381)
Total net deferred tax assets, before valuation allowance
 18,893  25,681 
Less: valuation allowance (19,241) (25,681)
Deferred tax liabilities, net of valuation allowance $ (348) $ — 

The amounts of cash income taxes paid by the Company were as follows:
For the Year Ended December 31, 2025
Federal $ — 
State
Minnesota 83 
All other states 4 
Income taxes, net of amounts refunded $ 87 
As of December 31, 2025, the Company has a valuation allowance of approximately $19,241 against the net deferred tax assets, for which realization cannot be considered more likely than not at this time. In assessing the need for a valuation allowance, the Company considers all positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, jurisdictional netting and past financial performance. As of December 31, 2025 and 2024, based upon the consideration of such evidence, management believes a full valuation allowance against net deferred tax assets is warranted.
 
The valuation allowance recorded by the Company as of December 31, 2025 resulted from uncertainties of the future utilization of deferred tax assets relating primarily to net operating loss (“NOL”) carryforwards for US federal and state income tax purposes. Realization of the NOL carryforwards is contingent on future taxable earnings. The deferred tax asset was reviewed for expected utilization using a “more likely than not” approach by assessing the available positive and negative evidence surrounding its recoverability. Accordingly, a full valuation allowance continues to be recorded. The Company's valuation allowance decreased by $6,440.
The Company’s net deferred tax liability of $348 is what is commonly referred to as a "naked credit" or "hanging credit". A naked credit exists when a Company is subject to a valuation allowance and maintains a deferred tax liability that cannot be considered as a source of future taxable income for valuation allowance purposes, either because its reversal is indefinite in nature or otherwise. The result of a naked credit is a deferred tax liability that remains on the balance sheet. In future years, if the naked credit can be offset by deferred tax assets, the reversal will be recorded as a benefit through the profit and loss statement. The Company will continue to assess and evaluate strategies that will enable the deferred tax asset, or portion thereof, to be utilized, and will reduce the valuation allowance appropriately at such time when the “more likely than not” criteria is satisfied.

As of December 31, 2025, the Company has approximately $78,783 of gross US federal and $93,638 of gross US state and local net operating loss carryforwards. The US federal, state and city net operating losses begin to expire in the year 2035. Federal net operating losses incurred in tax year 2018 and beyond do not expire. The Company has $66,665 of federal net operating losses with an indefinite life. The Company's net operating losses in Canada, France and Monaco were disposed of in connection with the sale of the passenger business.
  
Sections 382 and 383 of the Internal Revenue Code of 1986 subject the future utilization of net operating losses and certain other tax attributes, such as research and experimental tax credits, to an annual limitation in the event of certain ownership changes, as defined. The Company has undergone an ownership change study and has determined multiple changes in ownership as defined by IRC Section 382 of the Internal Revenue Code of 1986, did occur in December 2017, February 2018, and May 2021. Based on the Company having undergone multiple ownership changes throughout its history, $3,304 of gross federal net operating losses are unavailable and will become available through 2037.
  
The Company files tax returns in the U.S. federal and various US state and local jurisdictions and is subject to examination by tax authorities. The Company has reported US net operating losses dating back to inception. The IRS may examine records from the year a loss occurred when a net operating loss is applied. Thus, the Company is subject to U.S. federal income tax examinations for all years. The statute in other jurisdictions is generally 3-4 years.