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Note 10 - Income Taxes
 12 Months Ended
Dec. 31, 2024
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

10. Income taxes

 

The Company is subject to federal and state income taxes in the United States. For the years ended December 31, 2024 and 2023, the provision for income taxes on income (loss) from operations consisted of the following:

 

  

Year Ended December 31

 

(In thousands)

 

2024

  

2023

 

Current:

        

Federal

 $(1,260) $(24)

State

  (278)  (70)

Foreign

  3   123 

Total current

  (1,535)  29 

Deferred:

        

Federal

  (7,597)  (3,352)

State

  (1,001)  (462)

Foreign

  (275)  20 

Less: valuation allowance

  8,597   3,649 

Total deferred

  (276)  (145)

Total income tax expense (benefit)

 $(1,811) $(116)

 

For the years ended December 31, 2024 and 2023, the provision for income taxes differs from the amounts computed by applying the applicable federal statutory rates as follows:

 

  

Year Ended December 31,

 

(In thousands)

 

2024

  

2023

 

Federal income taxes at the statutory rate

 $(6,528)  21.0% $(13,300)  21.0%

Share-based compensation shortfall (windfall)

  6   (0.0)  13   (0.0)

Effect of state taxes, net of federal tax benefit

  (999)  3.2   (517)  0.8 

Non-deductible items

  39   (0.1)  (421)  0.7 

Goodwill impairment

  —   —   9,491   (15.0)

Return to provision adjustment

  (540)  1.7   2,731   (4.3)

Foreign rate difference

  (56)  0.2   16   (0.0)

Deferred only adjustments

  343   (1.1)  197   (0.3)

Research and development credit

  (1,194)  3.8   (1,992)  3.1 

Other

  1   (0.0)  17   (0.0)

Change in valuation allowance

  8,597   (27.7)  3,649   (5.8)

Reversal of uncertain tax position (UTP)

  (1,480)  4.8   —   — 

Income tax expense (benefit)

 $(1,811)  5.8% $(116)  0.2%

 

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. As of December 31, 2024 and 2023, the significant components of deferred tax assets and (liabilities) consist of the following:

 

(In thousands)

 

December 31, 2024

  

December 31, 2023

 

Deferred tax assets:

        

Net operating loss carryforwards

 $5,136  $1,400 

Share-based compensation

  4,569   5,129 

Capitalized research and experimental expenditures

  5,257   3,069 

Intangible assets, net

  2,230   1,415 

Tax credits

  2,786   1,413 

Accrued expense

  894   1,178 

Operating lease liability

  450   973 

Interest expense limitation

  1,652   589 

Accounts receivable, net

  119   56 

Other

  765   280 
   23,858   15,502 

Valuation allowance

  (23,165)  (14,568)

Total deferred tax assets, net of valuation allowance

  693   934 
         

Deferred tax liabilities:

        

Operating lease right-of-use asset

  (383)  (827)

Property and equipment, net

  (64)  (136)
   (447)  (963)

Net deferred tax asset (liability)

 $246  $(29)

 

As of December 31, 2024, the Company has federal net operating loss carryforwards of $15,294, which can be carried forward indefinitely, and state net operating loss carryforwards of $31,803, which begin to expire in 2030. 

 

As of December 31, 2024 and 2023, the Company recorded a full valuation allowance against its net deferred tax assets of $23,165 and $14,568, respectively, which is driven by the movement in the net deferred tax assets. For the year ended December 31, 2024, the movement in the net deferred tax assets are primarily a result of the capitalized research and experimental expenditures, increase in capitalized interest expense, and generation of federal and state net operating losses. The Company intends to continue maintaining a full valuation allowance on these net deferred tax assets until there is sufficient evidence to support the release of all or some portion of these allowances. Release of some or all of the valuation allowance would result in the recognition of certain deferred tax assets and an increase in deferred tax benefit for any period in which such a release may be recorded, however, the exact timing and amount of any valuation allowance release are subject to change, depending upon the level of profitability that the Company is able to achieve and the net deferred tax assets available.

 

The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. The Company files tax returns in federal and certain state and local jurisdictions. The periods subject to examination are generally for tax years ended 2020 through 2023, including the following major jurisdictions: U.S. Federal, New York State, and New York City. 

 

For the years ended December 31, 2024 and 2023, reconciliation of the gross amounts of unrecognized tax benefits, excluding accrued interest and penalties, consists of the following:

 

  

Year Ended December 31,

 

(In thousands)

 

2024

  

2023

 

Unrecognized tax benefits, opening balance

 $1,480  $1,480 

Reductions in unrecognized tax benefits for tax positions of prior years

  (1,480)  — 

Unrecognized tax benefits, ending balance

 $—  $1,480