Note 11 - Income Taxes

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Income Tax Disclosure [Text Block]

NOTE 11. INCOME TAXES

Deferred tax asset (liability) is comprised of the following (in thousands):

	December 31
	2022			2021
Net operating loss carryforwards	$	14,264		$	13,385
Stock options and warrants		1,151			832
Property and equipment		(46	)		16
Intangible assets		875			950
Capitalized expenses		117			105
Other		655			64
Operating right-of-use lease assets		(478	)		(566	)
Operating right-of-use lease liabilities		645			670
Net deferred tax assets		17,183			15,456
Less: Valuation allowance		(17,183	)		(15,456	)
Deferred tax asset (liability)	$	-		$	-

We have determined it is more likely than not that our deferred tax assets will not be realized. Accordingly, we have provided a valuation allowance for deferred tax assets.

The following table summarizes the change in the valuation allowance (in thousands):

	2022			2021
Valuation allowances, beginning of year	$	15,456		$	12,421
Net operating loss and other temporary differences		1,997			2,926
Expiration of net operating losses and limitations		(90	)		-
Adjustment to deferred taxes		(197	)		67
Impact of state tax rate change		22			42
Other		(5	)		-
Valuation allowance, end of year	$	17,183		$	15,456

As of December 31, 2022, net operating loss (NOL) carryforwards for U.S. federal tax purposes totaled $54.4 million. NOLs generated after December 31, 2017, do not expire. Federal NOLs of $9.9 million expire at various dates from 2023 through 2037 and the remainder do not expire. NOL carryforwards for state tax purposes totaled $46.0 million at December 31, 2022, and expire at various dates from 2023 through 2042.

Our ability to utilize previously accumulated NOL carryforwards is subject to substantial annual limitations due to the changes in ownership provisions of the Internal Revenue Code (IRC) of 1986, as amended, and similar state regulations. Prior to 2020, we experienced several ownership changes as defined in IRC Section 382(g). In general, the annual limitation is equal to the value of our stock immediately before the ownership change, multiplied by the long-term tax-exempt rate for the month in which the ownership change occurred. Any unused annual limitation may generally be carried over to later years until the NOL carryforwards expire. Accordingly, we have reduced our NOL in the table above to reflect these limitations.

We are subject to taxation in the U.S. federal jurisdiction and various state and local jurisdictions. We record liabilities for income tax contingencies based on our best estimate of the underlying exposures. We are open for audit by the IRS for years after 2018 and, generally, by U.S. state tax jurisdictions after 2017.

Reconciliations between the amounts computed by applying the U.S. federal statutory tax rate to loss before income taxes, and income tax expense (benefit) follows (in thousands):

	2022			2021
Income tax benefit at federal statutory rate	$	(1,646	)	$	(1,875	)
Increase (decrease) resulting from:
State tax benefit, net of federal tax effect		(421	)		(605	)
Effect of change in state tax rate		(22	)		(42	)
Change in valuation allowance		1,727			3,035
Expirations of net operating losses and application of IRC 382 limitation		90			-
PPP loan forgiveness, nontaxable		-			(376	)
Change in fair value of derivative warrant liability, nontaxable		5			(81	)
Other nondeductible expenses		89			32
Adjustments to deferreds		197			(67	)
Income tax expense	$	19		$	21

Based on an analysis of tax positions taken on income tax returns filed, we determined no material liabilities related to uncertain income tax positions existed as of December 31, 2022 or 2021. Although we believe the amounts reflected in our tax returns substantially comply with applicable U.S. federal, state and local tax regulations, the respective taxing authorities may take contrary positions based on their interpretation of the law. A tax position successfully challenged by a taxing authority could result in an adjustment to our provision or benefit for income taxes in the period in which a final determination is made.