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Note 7 - Income Taxes | 12 Months Ended
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Dec. 31, 2024
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | NOTE 7 – INCOME TAXES The components of income before income taxes for the years ended December 31, 2024 and 2023 are as follows:
|  | YEARS ENDED December 31, |
|  | 2024 |  |  | 2023 |
Domestic |  | $ | 1,086,000 |  |  | $ | 666,000 |
Foreign |  |  | 151,000 |  |  |  | 30,000 |
Income before income taxes |  | $ | 1,237,000 |  |  | $ | 696,000 |
For the year ended December 31, 2024 and 2023, the Company recorded an income tax benefit of $295,000 and income tax expense of $431,000, respectively. The components of the provision for income taxes for the years ended December 31, 2024 and 2023 consists of the following:
|  | YEARS ENDED December 31, |
|  | 2024 |  |  | 2023 |
Current: |  |  |  |  |  |  |  |
Federal |  | $ | (83,000 | ) |  | $ | 940,000 |
State |  |  | (190,000 | ) |  |  | 115,000 |
Foreign |  |  | 337,000 |  |  |  | 135,000 |
Total current |  |  | 64,000 |  |  |  | 1,190,000 |
Deferred: |  |  |  |  |  |  |  |
Federal |  |  | (380,000 | ) |  |  | (672,000 | )
State |  |  | 30,000 |  |  |  | (77,000 | )
Foreign |  |  | (9,000 | ) |  |  | (10,000 | )
Total deferred |  |  | (359,000 | ) |  |  | (759,000 | )
|  | $ | (295,000 | ) |  | $ | 431,000 |
Significant components of the Company’s deferred tax liabilities and assets as of December 31, 2024 and 2023 are as follows:
|  | December 31, |
|  | 2024 |  |  | 2023 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Property and equipment |  | $ | (644,000 | ) |  | $ | (323,000 | )
Prepaid expenses |  |  | (444,000 | ) |  |  | (409,000 | )
Investment in partnerships |  |  | (956,000 | ) |  |  | — |
Other |  |  | (14,000 | ) |  |  | — |
ROU asset |  |  | — |  |  |  | (12,000 | )
Total deferred tax liabilities |  |  | (2,058,000 | ) |  |  | (744,000 | )
Deferred tax assets: |  |  |  |  |  |  |  |
Net operating loss carryforwards |  |  | 651,000 |  |  |  | 155,000 |
Accruals and allowances |  |  | 168,000 |  |  |  | 438,000 |
Lease liabilities |  |  | — |  |  |  | 12,000 |
Tax credits |  |  | — |  |  |  | 4,000 |
Transaction costs |  |  | 231,000 |  |  |  | — |
Other |  |  | 169,000 |  |  |  | 140,000 |
Capital loss carryover |  |  | — |  |  |  | 646,000 |
Total deferred tax assets |  |  | 1,219,000 |  |  |  | 1,395,000 |
Valuation allowance |  |  | (85,000 | ) |  |  | (714,000 | )
Deferred tax assets net of valuation allowance |  |  | 1,134,000 |  |  |  | 681,000 |
Net deferred tax liabilities |  | $ | (924,000 | ) |  | $ | (63,000 | )
NOTE 7 – INCOME TAXES (CONTINUED) The provision for income taxes differs from the amount computed by applying the U.S. federal statutory tax rate (21% in 2024 and 2023) to income before taxes as follows:
|  | YEARS ENDED December 31, |
|  | 2024 |  |  | 2023 |
Computed expected federal income tax |  | $ | 390,000 |  |  | $ | 218,000 |
State income taxes, net of federal benefit |  |  | (84,000 | ) |  |  | 12,000 |
Foreign rate differential |  |  | 14,000 |  |  |  | 38,000 |
Pass-through income |  |  | (18,000 | ) |  |  | — |
Bargain purchase gain |  |  | (790,000 | ) |  |  | — |
Stock compensation |  |  | 1,000 |  |  |  | 7,000 |
Non-deductible expenses |  |  | 230,000 |  |  |  | 6,000 |
Return to provision true-up |  |  | 3,000 |  |  |  | 18,000 |
Uncertain tax positions |  |  | (72,000 | ) |  |  | 9,000 |
Capital loss expired |  |  | 645,000 |  |  |  | — |
Change in valuation allowance |  |  | (627,000 | ) |  |  | 17,000 |
Other deferred tax adjustments |  |  | 13,000 |  |  |  | 106,000 |
|  | $ | (295,000 | ) |  | $ | 431,000 |
Due to uncertainty surrounding the realization of impairment losses, capital losses and foreign operating losses in future years, the Company has placed a valuation allowance against a portion of its net domestic and foreign deferred tax assets. The net valuation allowance decreased by $627,000 and increased by $17,000 for the years ended December 31, 2024 and 2023, respectively. The Company has federal net operating loss carryforwards of approximately $1,966,000 and $0 as of December 31, 2024 and 2023, respectively. All federal net operating losses have an indefinite carryforward period. The Company has various state net operating loss carryforwards. The determination of the state net operating loss carryforwards is dependent upon apportionment percentages and state laws that can change from year to year and impact the amount of such carryforwards. If such net operating carryforwards are not utilized, they will begin to expire in 2029. The tax return years 2019 through 2024 remain open to examination by the major domestic taxing jurisdictions to which the Company is subject. NOTE 7 – INCOME TAXES (CONTINUED) The Company has adopted accounting standards which prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of uncertain tax positions taken or expected to be taken in a company’s income tax return, and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. Additionally, these accounting standards specify that tax positions for which the timing of the ultimate resolution is uncertain should be recognized as long-term liabilities. The Company has made no reclassifications between current taxes payable and long term taxes payable under this guidance. As of December 31, 2024, the unrecognized tax benefit was $161,000 which, if recognized, will not affect the annual effective tax rate as these unrecognized tax benefits would increase deferred tax assets, which would be subject to a full valuation allowance. A reconciliation of the beginning and ending amount of unrecognized tax benefit is as follows:
|  | YEARS ENDED December 31, |
|  | 2024 |  |  | 2023 |
Balance at beginning of year |  | $ | 287,000 |  |  | $ | 278,000 |
Additions based on tax positions of prior years |  |  | 13,000 |  |  |  | 9,000 |
Additions based on tax positions of current year |  |  | 12,000 |  |  |  | — |
Reductions in tax positions of prior years |  |  | (18,000 | ) |  |  | — |
Lapse of statues of limitations |  |  | (75,000 | ) |  |  | — |
Removal of penalties |  |  | (58,000 | ) |  |  | — |
Balance at end of year |  | $ | 161,000 |  |  | $ | 287,000 |
The Company’s policy for deducting interest and penalties is to treat interest as interest expense and penalties as income taxes. As of December 31, 2024, the Company had $36,000 accrued for the payment of penalties and zero interest related to unrecognized tax benefits. The Company does not expect any material changes to our uncertain tax positions within the next 12 months. The Company does not expect any material changes to uncertain tax positions within the next twelve months.

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