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Note 9 - Income Taxes
 12 Months Ended
Dec. 31, 2024
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

NOTE 9: INCOME TAXES

 

Income tax expense consisted of the following:

 

  

Year ended December 31,

 
  

2024

  

2023

 

Tax provision summary:

        

State income tax

 $46  $39 

Deferred tax expense – federal

  41   9 

Deferred tax expense – state

  19   35 

Tax expense

 $106  $83 

 

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:

 

  

2024

  

2023

 

Federal statutory rate

  21.0%  21.0%

State taxes, net of federal benefit

  0.5%  1.3%

Foreign rate differential

  1.0%  1.1%

Fair value of Contingent Consideration

  (9.7)%  (6.5)%
Provision-to-return adjustments  (5.6)%  0.5%
Net operating loss expirations  (24.5)%  (2.5)%
Deferred tax true-ups  (0.2)%  (1.0)%

State rate changes

  (0.5)%  2.0%
Other permanent  (1.6)%  (1.2)%

Changes in valuation allowance

  16.5%  (16.5)%

Effective tax rate

  (3.1)%  (1.8)%

 

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,

 
  

2024

  

2023

 

Deferred tax assets (liabilities):

        

Reserves

 $239  $249 

Property and equipment

  41   57 

Accrued expenses

  325   514 

Right-of-use Asset

  (207)  (254)

Right-of-use Liability

  212   254 

IRC 163(j) Interest Carryforward

  651   704 

Debt issuance costs

  -   135 

Non-qualified stock options

  1,645   1,708 

IRC Section 174

  1,962   593 

Net foreign carryforwards

  4,148   3,753 
Research and development credits  2,312   2,312 

US net operating loss and contribution carryforwards

  37,437   38,010 

Intangibles

  (5,244)  (3,818)
         

Total deferred tax liabilities, net

  43,521   44,217 

Valuation allowance

  (43,654)  (44,290)

Net deferred tax liabilities

 $(133) $(73)

 

As of December 31, 2024, 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, 2024 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, 2024, 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, 2024, the Company has federal net operating loss carryforwards of $36,433, federal contribution carryforwards of $13, and state net operating loss carryforwards of $991 expiring between 2025 and 2044, $2,631 of which have an indefinite carryforward period but are subject to limitation on usage such that they cannot be utilized to offset more than 80% of taxable income in a given tax year. The federal statute of limitations remains open for tax years 2020 through 2023 and state tax jurisdictions generally have statutes of limitations open for tax years 2020 through 2023.

 

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.