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
As discussed in Note 1, in December 2023, the FASB issued ASU 2023-09, which established new income tax disclosure requirements in addition to modifying and eliminating certain existing requirements. Under the new guidance, entities must consistently categorize and provide greater disaggregation of information in the rate reconciliation while also further disaggregating income taxes paid. In the fourth quarter of 2025, the company adopted ASU 2023-09.

On July 4, 2025, the legislation commonly referred to as the One Big Beautiful Bill Act ("OBBBA") was enacted in the United States. The OBBBA includes several significant changes in the U.S. tax law, including the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act and the restoration of favorable tax treatment for specific business provisions, including domestic research cost expensing and the business interest expense limitation. This legislation was enacted during the third quarter of 2025 and at this time, the Company does not expect the effects of this legislation to have a material impact on its financial results.

The Company's loss from continuing operations before income taxes is domestic-sourced only, and was as follows for the periods presented:

(in thousands) 2025 2024
Loss from continuing operations before income taxes $ (5,562) $ (10,771)

The Company's income tax expense from continuing operations consisted of the following:
(in thousands) 2025 2024
Current income taxes:    
Federal $ (26) $ (39)
State 134  (144)
Total current income taxes 108  (183)
Deferred tax expense:  
Federal (98) 1,653 
State 12  336 
Total deferred income taxes (86) 1,989 
Income tax expense $ 22  $ 1,806 
The reconciliation of the statutory federal income tax rate to the effective tax rate for the current year in comparison of prior year in accordance with the adoption of ASU 2023-09 is as follows:
(in thousands) 2025 2024
Amount % Amount %
Tax at U.S. statutory rates $ (1,168) 21.0  % $ (2,262) 21.0  %
State income taxes, net of federal tax benefit1
340  (6.1) % (7) 0.1  %
State valuation allowance (225) 4.0  % 158  (1.5) %
Federal valuation allowance 966  (17.3) % 4,095  (38.0) %
Stock option compensation 104  (1.9) % 37  (0.3) %
Other nondeductible expenses 5  (0.1) % (12) 0.1  %
Other, net —  —  % (203) 1.8  %
Total $ 22  (0.4) % $ 1,806  (16.8) %
1The state that contributes the majority (greater than 50%) of the tax effect in this category is South Carolina..

A summary of total income taxes paid (net of refunds), in accordance with the adoption of ASU 2023-09 for the year ended December 31, 2025 is as follows:

(in thousands) 2025
U.S. Federal $ (20)
U.S. State total $ (73)

Income taxes paid (net of refunds) exceeded five percent of total income taxes paid (net of refunds) in the following jurisdictions:

(in thousands) 2025
Georgia $ 77 
South Carolina 12 
Illinois (143)
Virginia (17)
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 components of the Company's deferred tax assets and liabilities from continuing operations are as follows at the respective year ends: 
(in thousands) 2025 2024
Deferred income tax assets:    
Inventory valuation reserves $ 306  $ 1,570 
Inventory capitalization 96  550 
Accrued bonus 483  318 
State net operating loss carryforwards 1,911  2,055 
Federal net operating loss carryforwards 5,813  4,075 
Lease liabilities 3,037  7,484 
Interest limitation carryforwards 1,302  1,488 
Intangible asset basis differences (671) 781 
Other 752  1,444 
Total deferred income tax assets 13,029  19,765 
State valuation allowance (1,757) (2,026)
Federal valuation allowance (6,681) (7,040)
       Total net deferred income tax assets 4,591  10,699 
Deferred income tax liabilities:
Fixed asset basis differences 2,163  4,010 
Prepaid expenses 293  300 
Lease assets 2,376  6,709 
Total deferred income tax liabilities 4,832  11,019 
Deferred income taxes, net $ (241) $ (320)

The Company's effective tax rate for 2025 was less than the U.S. statutory rate of 21% primarily driven by adjustments to the valuation allowance in the period and increases in stock compensation. The Company's effective tax rate for 2024 was less than the U.S. statutory rate of 21% primarily due to discrete tax charges associated with recording a valuation allowance on cumulative US Federal and state deferred tax assets.

The Company made no income tax payments in 2025 or 2024. The Company has $27.7 million of U.S. Federal net operating loss carryforwards and $6.2 million of interest limitation carryforwards at the end of 2025 compared to $19.4 million of U.S. Federal net operating loss carryforwards and $7.1 million of interest limitation carryforwards at the end of 2024. During the period, the Company determined that these carryforwards are unrealizable and not more likely than not to be utilized in future periods. The majority of these carryforwards are not subject to expiration.

In addition, on a gross basis the Company had state net operating loss carryforwards of $41.8 million and $46.2 million at the end of 2025 and 2024, respectively. As of the end of 2025, the Company had recognized a state valuation allowance of $1.8 million, representing approximately a $0.3 million decrease year-over-year primarily driven by net operating loss carryforward expiration in jurisdictions for which we believe it is not more likely than not to be utilized in future periods. The majority of these losses will expire between the years of 2026 and 2044, while certain losses are not subject to expiration.
The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. The Company is no longer subject to U.S. federal examinations for years before 2020 or state examinations for years before 2019.

The Company had no uncertain tax position activity during 2025 or 2024. The Company's continuing practice is to recognize interest and/or penalties related to income tax matters in the provision for income taxes. The Company had no accruals for uncertain tax positions including interest and penalties at the end of 2025.