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Note 14 - Income Taxes | 9 Months Ended
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Sep. 30, 2025
Notes to Financial Statements |
Income Tax Disclosure [Text Block] |
14. | Income Taxes
The income tax expense was $0.9 million and $1.7 million for the three- and nine-month periods ended September 30, 2025, resulting in effective tax rates of (42.0)% and (17.0)%, respectively. The income tax expense was $2.2 million and $3.5 million for the three- and nine-month periods ended September 30, 2024, resulting in an effective tax rate of 667.7 % and (126.3)%, respectively. The net change in the effective tax rate for the three- and nine-month periods ended September 30, 2025, compared to the same periods in 2024, was primarily driven by the impact of a higher year-to-date pre-tax loss in the current year and higher U.S. current tax expense in the prior year. The higher income tax expense in the prior year was due to higher current income tax expense in the U.S. The Company’s effective tax rate for the three-month and nine-month periods ended September 30, 2025 was primarily driven by the full valuation on the Company's deferred tax assets in the U.S. and the projected taxable income for the Company resulting in current tax expense in 2025. The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, carryback potential if permitted under the tax law, and results of recent operations. The Company has incurred operating losses in recent years. As a result, the Company anticipates that deferred tax assets originating during the year ended December 31, 2025 will exceed the availability of reversing taxable temporary differences. Due to significant negative evidence, including the Company’s prior year operating losses, the Company concluded its anticipated net deferred tax assets in the U.S. are not more likely than not to be realizable. Accordingly, the income tax provision for the nine-month period ended September 30, 2025 includes an adjustment for the valuation allowance required against the U.S. deferred tax assets. As of September 30, 2025, the Company continues to believe its foreign deferred tax assets are realizable based upon future reversals of existing taxable temporary differences and projected future taxable income. The Company files income tax returns in the United States on a federal basis, in certain U.S. states, and in certain foreign jurisdictions. The associated tax filings remain subject to examination by applicable tax authorities for a certain length of time following the tax year to which those filings relate, which varies by jurisdiction. In September 2024, the Company was notified by the Italian tax authorities that it had selected the Company’s tax returns for its Italian subsidiary for 2021 for examination and they remain under review. On July 4, 2025, new U.S. tax legislation was enacted, including updates to provisions related to research and development expensing for income tax purposes, bonus depreciation, and international tax regimes. During the three-months ended September 30, 2025, the Company evaluated the elective provisions allowed under the new U.S. tax legislation and accounted for tax deductions for bonus depreciation and research and development expenses allowed under the new legislation. Other enacted changes are not expected to have a material impact on the Company’s financial statements.

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