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Note 10 - Income Taxes
 12 Months Ended
Dec. 31, 2023
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

NOTE 10: INCOME TAXES

 

Income tax expense consisted of the following:

 

  

Year ended December 31,

 
  

2023

  

2022

 

Tax provision summary:

        

State income tax

 $39  $51 

Deferred tax expense - federal

  9   30 

Deferred tax expense (benefit) – state

  35   (2)

Tax expense

 $83  $79 

 

The income tax expense includes federal and state income taxes currently payable and those deferred or prepaid because of temporary differences between financial statement and tax bases of assets and liabilities. The Company records income taxes under the liability method. Under this method, deferred income taxes are recognized for the estimated future tax effects of differences between the tax bases of assets and liabilities and their financial reporting amounts based on enacted tax laws.

 

A reconciliation of the statutory income tax rate to the effective income tax rates as a percentage of income before income taxes is as follows:

 

  

2023

  

2022

 

Federal statutory rate

  21.00%  21.00%

State taxes, net of federal benefit

  1.28%  (2.02)%

Foreign rate differential

  1.05%  (2.51)%

Fair value of Warrant Liability/Contingent Consideration

  (6.48)%  (79.66)%

Discrete items, Transaction items, and Other

  (2.13)%  (2.37)%

Changes in valuation allowance

  (16.53)%  69.60%

Effective tax rate

  (1.81)%  4.04%

 

The net deferred tax assets and liabilities recognized in the accompanying Consolidated Balance Sheets, determined using the income tax rate applicable to each period, consist of the following:

 

  

December 31,

 
  

2023

  

2022

 

Deferred tax assets (liabilities):

        

Reserves

 $249  $472 

Property and equipment

  57   165 

Accrued expenses

  514   593 

Right-of-use Asset

  (254)  (253)

Right-of-use Liability

  254   253 

IRC 163(j) Interest Carryforward

  704   18 

Debt issuance costs

  135   286 

Non-qualified stock options

  1,708   1,469 

IRC Section 174

  593   196 

R&D credits

  2,312   2,312 

Net foreign carryforwards

  3,753   3,664 

US net operating loss and contribution carryforwards

  38,010   37,953 

Intangibles

  (3,818)  (3,737)
         

Total deferred tax liabilities, net

  44,217   43,391 

Valuation allowance

  (44,290)  (43,419)

Net deferred tax liabilities

 $(73) $(28)

 

As of December 31, 2023, the Company had no reserves recorded as a liability for unrecognized tax benefits for U.S. federal and state tax jurisdictions. There were no unrecognized tax benefits as of December 31, 2023 that, if recognized, would affect the tax rate. It is the Company’s policy to accrue interest and penalties related to liabilities for income tax contingencies in the provision for income taxes. As of December 31, 2023, the Company had no accrued interest or penalties related to uncertain tax positions.

 

Our deferred tax assets are primarily related to net federal and state operating loss carryforwards (NOLs). As of December 31, 2023, the Company has federal and state net operating loss carryforwards expiring between 2024 and 2043, $13,808 of which has an indefinite carryforward period. The federal statute of limitations remains open for tax years 2019 through 2022 and state tax jurisdictions generally have statutes of limitations open for tax years 2019 through 2022.

 

We have substantial NOLs that are limited in usage by IRC Section 382. IRC Section 382 generally imposes an annual limitation on the amount of NOLs that may be used to offset taxable income when a corporation has undergone significant changes in stock ownership within a statutory testing period.

 

We have performed a preliminary analysis of the annual NOL carryforwards and limitations that are available to be used against taxable income. Based on the history of losses of the Company, there continues to be a full valuation allowance against the net deferred tax assets of the Company.