Note 11 - Income Taxes

12 Months Ended

Dec. 31, 2023

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
	2023			2022
Net operating loss carryforwards	$	17,734		$	14,264
Stock options and warrants		1,090			1,151
Property and equipment		310			(46	)
Intangible assets		688			875
Capitalized expenses		105			117
Other		440			655
Operating right-of-use lease assets		-			-
Operating right-of-use lease liabilities		124			167
Net deferred tax assets		20,491			17,183
Less: Valuation allowance		(20,491	)		(17,183	)
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):

	2023			2022
Valuation allowances, beginning of year	$	17,183		$	15,456
Net operating loss and other temporary differences		3,974			1,997
Expiration of net operating losses and limitations		(33	)		(90	)
Adjustment to deferred taxes		(159	)		(197	)
Impact of state tax rate change		(404	)		22
Other		70			(5	)
Valuation allowance, end of year	$	20,491		$	17,183

As of December 31, 2023, net operating loss (NOL) carryforwards for U.S. federal tax purposes totaled $70.4 million. NOLs generated after December 31, 2017, do not expire. Federal NOLs of $9.9 million expire at various dates from 2036 through 2037 and the remainder do not expire. The Tax Cuts and Jobs Act (TCJA) limitation of 80% of taxable income is applied to NOLs generated in tax years beginning after December 31, 2017. NOL carryforwards for state tax purposes totaled $47.5 million at December 31, 2023. State NOLs of $45.6 million expire at various dates from 2024 through 2043 and the remainder do not expire.

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 2019 and, generally, by U.S. state tax jurisdictions after 2018.

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):

	2023			2022
Pre-tax income (loss)	$	(8,539	)	$	(6,641	)
Income tax benefit at federal statutory rate	$	(1,796	)	$	(1,646	)
Increase (decrease) resulting from:
State tax benefit, net of federal tax effect		(189	)		(421	)
Effect of change in state tax rate		404			(22	)
Change in valuation allowance		3,308			1,727
Expirations of net operating losses and application of IRC 382 limitation		33			90
Fair value adjustments and others		(1,960	)		5
Other nondeductible expenses		53			89
Adjustments to deferreds		159			197
Income tax expense	$	12		$	19

During the year ended December 31, 2023, income tax expense on the consolidated statement of operations included $12 thousand from minimum state taxes and franchise taxes.

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, 2023 or 2022. 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.