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Note O - Income Taxes
 12 Months Ended
Dec. 31, 2024
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

O.

Income Taxes

 

 The Company did not recognize any state tax expense during the years ended December 31, 2024, and 2023. A reconciliation of the difference between the (expense)/benefit for income taxes at the statutory U.S. federal income tax rate is as follows (in thousands, except amounts pertaining to rate which are shown as a percentage):

 

  

Year ended December 31,

 
  

2024

  

2023

 

Federal statutory rate

  21.00%  21.00%

Effect of:

        

Foreign rate differential

  0.04   - 

Change in valuation allowance

  (13.17)  (23.29)

Return to provision and deferred true-up

  (4.40)  (2.41)

Federal research and development credit

  -   4.09 

Change in rate

  -   (0.01)

State tax benefit (net of federal)

  5.05   5.19 

Stock-based compensation

  (0.55)  (0.20)

Global intangible low-taxed income credit

  (0.02)  (3.41)

Officers compensation

  (0.23)  - 

Expiration of net operating loss deferred tax asset

  (3.01)  - 

Deferred adjustment and rate change

  (4.27)  - 

Foreign research and development excess benefit

  -   (0.86)

Uncertain tax position

  (17.88)  - 

Other

  0.39   (0.10)

Federal income tax provision effective rate

  (17.05)%  0.00%

 

The components of deferred tax assets and liabilities are as follows (in thousands):

 

  

December 31,

 
  

2024

  

2023

 

Deferred tax assets relating to:

        

Net operating loss carryforwards

 $100,552  $90,743 

Research and development tax carryforward

  19,153   20,670 

Stock-based compensation

  5,711   5,154 

174 expenses

  33,941   30,241 

Right-of-use liability

  108   265 

Property and equipment

  79   23 

Other deferred tax assets

  3,652   1,951 

Total gross deferred tax assets

  163,196   149,047 

Deferred tax liabilities relating to:

        

Right-of-use asset

  82   249 

Intangibles

  17,859   14,473 

Total gross deferred tax liabilities

  17,941   14,722 

Deferred tax assets less liabilities

  145,256   134,324 

Valuation allowance

  (146,359)  (134,488)

Net deferred tax liability

 $(1,103) $(164)

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable income (losses) and projections for future taxable income (losses) over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will not realize the benefits of these deductible differences in the future.

 

The Company recorded refundable research and development tax credit as other income and not income tax under ASC 740 in the consolidated statement of operations for the year ended December 31, 2023. These refundable tax credits are a result of increased qualified research and development spending in certain jurisdictions which allow for a refundable credit even when the Company has no current period income tax expense. The Company has analyzed their tax positions under the principles of ASC 740-10, Accounting for Uncertainty in Income Taxes.

 

In accordance with the Tax Cuts and Jobs Act of 2017, the Company evaluated its plans for reinvestment or repatriation of current and future earnings of foreign operations and determined to indefinitely reinvest current and future earnings of foreign operations in the foreign operation. The Company has not repatriated funds to the U.S. to satisfy domestic liquidity needs, nor does the Company anticipate the need to do so. If in the foreseeable future, the Company can no longer demonstrate that these earnings are indefinitely reinvested, a deferred tax liability will be recognized.

 

The Company has federal operating loss carryforwards totaling $381.3 million, $118.5 million of which, if not utilized, will begin to expire in 2027 and $262.8 million of which have no expiration date. The Company also has certain state net operating loss carryforwards totaling $428.6 million, which, if not utilized, will begin to expire in 2027. The Company also has Denmark net operating loss carryforwards totaling $7.7 million which has indefinite carryforward period in Denmark. Due to potential ownership changes that may have occurred or would occur in the future, Internal Revenue Code Section 382 may place additional limitations on the Company’s ability to utilize the net operating loss carryforward.