XML 39 R18.htm IDEA: XBRL DOCUMENT
v3.25.1

Note 9 - Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2024
Notes to Financial Statements |
Income Tax Disclosure [Text Block] |
9. | INCOME TAXES
The components of loss before income taxes consisted of the following for the years ended December 31:
|  | 2024 |  |  | 2023 |
United States |  | $ | (16,474,000 | ) |  | $ | (30,455,000 | )
Foreign |  |  | - |  |  |  | (188,000 | )
Loss from operations before income taxes |  | $ | (16,474,000 | ) |  | $ | (30,643,000 | )
The Company’s provision for income taxes consisted of the following for the years ended December 31:
|  | 2024 |  |  | 2023 |
Current: |  |  |  |  |  |  |  |
Federal taxes |  | $ | - |  |  | $ | - |
State taxes |  |  | - |  |  |  | - |
Foreign taxes |  |  | - |  |  |  | - |
Total current |  | $ | - |  |  | $ | - |
Deferred: |  |  |  |  |  |  |  |
Federal taxes |  | $ | 50,000 |  |  | $ | - |
State taxes |  |  | 111,000 |  |  |  | - |
Foreign taxes |  |  | - |  |  |  | (313,000 | )
Total deferred |  |  | 161,000 |  |  |  | (313,000 | )
Net provision for income taxes |  | $ | 161,000 |  |  | $ | (313,000 | )
The tax effects of temporary differences and carryforwards that give rise to significant portions of deferred tax assets and liabilities consist of the following as of December 31:
|  | 2024 |  |  | 2023 |
Deferred tax assets: |  |  |  |  |  |  |  |
Net operating loss and credits |  | $ | 40,819,000 |  |  | $ | 35,453,000 |
Intangibles – definite lived |  |  | 2,791,000 |  |  |  | 1,899,000 |
Stock compensation |  |  | 1,856,000 |  |  |  | 1,776,000 |
Accrued liabilities |  |  | 171,000 |  |  |  | 1,133,000 |
State taxes |  |  | 3,000 |  |  |  | 12,000 |
Capitalized research and development costs |  |  | 2,923,000 |  |  |  | 2,659,000 |
Total deferred tax assets |  |  | 48,563,000 |  |  |  | 42,932,000 |
Valuation allowance |  |  | (48,351,000 | ) |  |  | (42,855,000 | )
Deferred tax liabilities: |  |  |  |  |  |  |  |
Fixed assets |  |  | (35,000 | ) |  |  | (69,000 | )
Intangibles – indefinite lived |  |  | (338,000 | ) |  |  | - |
Contract liabilities |  |  | - |  |  |  | (8,000 | )
Total deferred tax liabilities |  |  | (373,000 | ) |  |  | (77,000 | )
Total net deferred tax assets (liabilities), net of valuation allowance |  | $ | (161,000 | ) |  | $ | - |
A reconciliation of the federal statutory income tax rate and the effective income tax rate is as follows:
|  | 2024 |  |  | 2023 |
Statutory federal– tax rate - (benefit) expense |  |  | 21 | % |  |  | 21 | %
State tax, net |  |  | 7 |  |  |  | 5 |
Non-deductible permanent items |  |  | (1 | ) |  |  | (2 | )
Change in tax rate |  |  | 3 | % |  |  | - |
Foreign taxes |  |  | - |  |  |  | 1 |
Other |  |  | 3 |  |  |  | (2 | )
Valuation allowance |  |  | (34 | ) |  |  | (22 | )
|  |  | (1 | )% |  |  | 1 | %
For the years ended December 31, 2024 and 2023, the Company recorded full valuation allowances against its domestic net deferred tax assets due to uncertainty regarding future realizability pursuant to guidance set forth in the FASB’s Accounting Standards Codification Topic No. 740, “Income Taxes.” In future periods, if the Company determines it will more likely than not be able to realize these amounts, the applicable portion of the benefit from the release of the valuation allowance will generally be recognized in the consolidated statements of operations in the period the determination is made. The Company did not maintain a valuation allowance on the activity in the United Kingdom (“UK”) from its acquisition of Bannerfy Ltd due to the deferred tax liability position. During the year ended December 31, 2023, Bannerfy Ltd sold all of its asset back to the original sellers and ceased operations as described below. As such, a full valuation was recorded against the remaining foreign deferred tax assets. Components of net loss before income tax attributable to foreign entities totaled $0 and $187,000 for the years ended December 31, 2024 and 2023, respectively. The Company assesses whether a valuation allowance should be recorded against its deferred tax assets based on the consideration of all available evidence, using a “more likely than not” realization standard. The four sources of taxable income that must be considered in determining whether deferred tax assets will be realized are: (1) future reversals of existing taxable temporary differences (i.e., offset of gross deferred tax assets against gross deferred tax liabilities); (2) taxable income in prior carryback years, if carryback is permitted under the applicable tax law; (3) tax planning strategies and (4) future taxable income exclusive of reversing temporary differences and carryforwards. In assessing whether a valuation allowance is required, significant weight is to be given to evidence that can be objectively verified. A significant factor in the Company’s assessment is that the Company has been in a three-year historical cumulative loss position as of the end of December 31, 2024. After a review of the four sources of taxable income (as described above) and after consideration of the Company's continuing cumulative loss position as of December 31, 2024, the Company has recorded a full valuation allowance on its deferred tax assets as presented in the table above. The change in the valuation allowance for the years ended December 31, 2024 and 2023 totaled $5,496,000 and $7,132,000, respectively. At December 31, 2024, the Company had U.S. federal, state income tax, and foreign net operating loss carryforwards of approximately $148.5 million, $141.8 million, and $1.1 million, respectively, expiring through 2044. Of the federal net operating losses, $24.5 million will expire from 2034 to 2037, and $124.0 million will carry over indefinitely. Federal net operating loss carryforwards generated in 2018 or after do not expire, however, they can only be used to offset 80% of taxable income in a given year. Of the state net operating losses, $140.2 million will expire from 2034 to 2044, and $1.7 million will carry over indefinitely. The $1.1 million of foreign net operating losses will carry over indefinitely. Utilization of the net operating loss carryforwards may be subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended, as well as similar state provisions. The Company has not completed a study to assess whether an ownership change has occurred or whether there have been multiple ownership changes since the Company’s formation due to the complexity and cost associated with such a study, and the fact that there may be additional such ownership changes in the future. ASC 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken on a tax return. The Topic also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Topic requires an entity to recognize the financial statement impact of a tax position when it is more likely than not that the position will be sustained upon examination. The amount recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. In addition, the Topic permits an entity to recognize interest and penalties related to tax uncertainties either as income tax expense or operating expenses. The Company will recognize interest and penalties related to tax uncertainties as income tax expense. There were no uncertain tax positions as of December 31, 2024. The Company is subject to taxation in the United States, various state and local jurisdictions, as well as foreign jurisdictions (primarily the UK) where the Company conducts business (2023 and prior). As of December 31, 2024, the company had no outstanding tax audits. Currently there are no audits in process or pending from Federal, state or foreign tax authorities. Federal and state income tax returns are subject to examination for a period of three to four years after filing. UK income tax returns are subject to examination for a period of four years after filing. In June 2023, the Company assigned the intangible assets originally acquired in connection with the Company’s acquisition of Bannerfy in fiscal year 2021, to the original sellers, as described at Note 4. The Bannerfy Acquisition was treated for tax purposes as a nontaxable transaction and, as such, the historical tax bases of the acquired assets and assumed liabilities, net operating losses, and other tax attributes of Bannerfy carried over, with no step-up to fair value of the underlying tax bases of the acquired net assets. The acquisition method of accounting included the establishment of a net deferred tax liability resulting from book tax basis differences related to assets acquired and liabilities assumed on the date of acquisition. When an acquisition of a group of assets is purchased in a transaction that is not accounted for as a business combination under ASC 805, a difference between the book and tax bases of the assets arises. ASC 740, “Income Taxes,” (“ASC 740”) required the use of simultaneous equations to determine the assigned value of the asset and the related deferred tax asset or liability. As a result of the disposal of the Bannerfy intangible assets, the Company recognized the related remaining net deferred tax liability, resulting in a $313,000 tax benefit reflected in the consolidated statements of operations for the year ended December 31, 2023.

X
- References No definition available. + Details
Name: | us-gaap_DisclosureTextBlockAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for income tax. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 12 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482685/740-10-50-12 Reference 2: http://www.xbrl.org/2003/role/exampleRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 231 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482663/740-10-55-231 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 12C -Publisher FASB -URI https://asc.fasb.org/1943274/2147482685/740-10-50-12C Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 12B -Publisher FASB -URI https://asc.fasb.org/1943274/2147482685/740-10-50-12B Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 270 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Publisher FASB -URI https://asc.fasb.org/1943274/2147477891/740-270-50-1 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SAB Topic 6.I.5.Q1) -Publisher FASB -URI https://asc.fasb.org/1943274/2147479360/740-10-S99-1 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 946 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 13 -Publisher FASB -URI https://asc.fasb.org/1943274/2147480990/946-20-50-13 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 235 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480678/235-10-S99-1 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/740/tableOfContent Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 14 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482685/740-10-50-14 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 21 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482685/740-10-50-21 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 17 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482685/740-10-50-17 Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -Publisher FASB -URI https://asc.fasb.org/1943274/2147479360/740-10-S99-2 Reference 14: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 30 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482603/740-30-50-2 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration