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Note 18 - Income Taxes
 12 Months Ended
Dec. 31, 2023
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

NOTE 18. INCOME TAXES

 

For the years ended December 31, 2023 and 2022, loss before provision for income taxes consisted of the following (in thousands):

 

  

For the Years Ended December 31,

 
  

2023

  

2022

 

United States

 $(9,640) $(10,608)

International

  —   — 
  $(9,640) $(10,608)

 

For the years ended December 31, 2023 and 2022, the federal and state income tax provision is summarized as follows (in thousands):

 

  

For the Years Ended December 31,

 
  

2023

  

2022

 

Current

        

Federal

 $—  $— 

State

  —   — 

Other

  —   — 

Total current tax expense

 $—  $— 
         
         

Deferred

        

Federal

  —   — 

State

  —   — 

Other

  —   — 

Total deferred tax expense

 $—  $— 
         

Income tax provision

 $—  $— 

 

Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating losses and tax credit carryforwards.

 

The tax effects of significant items comprising the Company's deferred taxes as of December 31, 2023 and 2022 are as follows (in thousands):

 

  

For the Years Ended December 31,

 
  

2023

  

2022

 

Deferred tax assets:

        

Net operating losses

 $36,943  $35,234 

Acquisition assets

  2,257   — 

Stock options

  665   750 

Research and development credits

  641   641 

Accruals

  477   464 

Operating lease liabilities

  368   472 

Property and equipment

  28   13 

Other deferred tax assets

  6   331 

Total deferred tax assets

  41,385   37,905 
         

Deferred tax liabilities:

        

Operating lease right-of-use assets

  (337)  (472)

Total deferred tax liabilities

  (337)  (472)
         

Valuation allowance

  (41,048)  (37,433)

Net deferred taxes

 $—  $— 

 

ASC 740, Income Taxes, requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than not”. Realization of the future tax benefits is dependent on the Company's ability to generate sufficient taxable income within the carryforward period. Because of the Company's recent history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a valuation allowance.

 

The valuation allowance increased by $3.6 million and $1.8 million during the years ended December 31, 2023 and 2022, respectively.

 

Net operating loss and tax credit carryforwards as of December 31, 2023, are as follows (in thousands):

 

     

Expiration

  

Amount

 

Years

Net operating losses, federal (Post December 31, 2017)

 $44,443 

Does Not Expire

Net operating losses, federal (Pre January 1, 2018)

 $94,886 

Beginning in 2024

Net operating losses, state

 $117,375 

Beginning in 2028

Tax credits, federal

 $542 

Beginning in 2031

Tax credits, state

 $125 

Indefinite

 

A reconciliation of the beginning and ending balances of the unrecognized tax benefits during the below years are as follows (in thousands):

 

  

For the Years Ended December 31,

 
  

2023

  

2022

 

Unrecognized benefit - beginning of period

 $974  $974 

Change during the period

  —   — 

Unrecognized benefit - end of period

 $974  $974 
 

The entire amount of the unrecognized tax benefits would not impact our effective tax rate if recognized. Accrued interest and penalties related to unrecognized tax benefits are classified as income tax expense and were immaterial for the years ended December 31, 2023 and 2022. The Company files income tax returns in the United States and in California. Other jurisdictions are not significant. The tax years 2019 - 2022 remain open in the federal jurisdiction and 2018 - 2022 for California. The Company is not currently under examination by income tax authorities in federal, state or other jurisdictions.

 

The effective tax rate of the Company's provision (benefit) for income taxes differs from the federal statutory rate as follows:

 

  

For the Years Ended December 31,

 
  

2023

  

2022

 

Statutory rate

  21.0%  21.0%

State tax

  4.5%  7.9%

Change in valuation allowance

  (19.5%)  (48.0%)

Warrant/equity expenses

  (3.7%)  20.2%

Stock-based compensation expense

  (1.4%)  (4.2%)

Impairment of assets

  (0.9%)  —%

Other

  (0.1%)  (0.1%)

Change in value of earnout

  —%  3.2%

Total

  0.0%  0.0%