Note 14 - Income Taxes

9 Months Ended

Sep. 30, 2026

Notes to Financial Statements

Income Tax Disclosure [Text Block]

NOTE 14. INCOME TAXES

The Company recorded income tax expense of $5.6 million and $0 for the three months ended September 30, 2026 and 2025, respectively, and $5.6 million and $0 for the nine months ended September 30, 2026 and 2025, respectively. The expense for the three months ended September 30, 2026 consists substantially of deferred income tax expense arising from the unrealized gain on the Company’s digital assets, which is recognized for financial reporting purposes but not for income tax purposes until realized, and resulted in a net deferred tax liability of $5.6 million as of September 30, 2026. The income tax provision for discontinued operations is presented separately in Note 13, “Divestitures.” The Company’s effective income tax rate was approximately 10.0% and 0% for the three months ended September 30, 2026 and 2025, respectively, and approximately 1.0% and 0% for the nine months ended September 30, 2026 and 2025, respectively. The effective rate for the 2026 periods differs from the U.S. federal statutory rate of 21% primarily because the non-cash loss on fair value of warrant liabilities in excess of proceeds at issuance and the non-cash gain on changes in fair value of warrant liabilities are not recognized for income tax purposes, and because of changes in the valuation allowance against the Company’s deferred tax assets.

In accordance with ASC 740-270-30-18, the Company has determined that it is unable to make a reliable estimate of its annual effective tax rate for the year ending December 31, 2026. Small variations in forecasted pre-tax book income produce significant variability in the estimated annual effective tax rate due to the magnitude of non-cash items, including the remeasurement of liability-classified warrants and the recognition of unrealized gains and losses on digital assets measured at fair value. As a result, the Company has computed its income tax provision for the period ended September 30, 2026 using the actual effective tax rate for the year-to-date period, which the Company believes represents the best estimate of the annual effective tax rate.

The Company evaluates the realizability of its deferred tax assets each reporting period based on all available positive and negative evidence, including cumulative results in recent years and the character and timing of reversals of existing taxable temporary differences. As of March 31, 2026, taxable temporary differences related to unrealized gains on the Company’s digital assets provided sufficient positive evidence that it was more likely than not that the Company’s deferred tax assets would be realized, and the Company recorded a net deferred tax liability. During the three months ended June 30, 2026, a decline in the value of the Company’s digital assets reversed the unrealized gain to an unrealized loss, resulting in a net deferred tax asset against which the Company recorded a full valuation allowance. During the three months ended September 30, 2026, the increase in the value of the Company’s digital assets reversed the unrealized loss to an unrealized gain, and the resulting taxable temporary difference again represents a source of future taxable income sufficient to support the realization of the Company’s deferred tax assets, which include net operating loss carryforwards remaining after the limitation under Section 382 of the Internal Revenue Code and other deductible temporary differences. Accordingly, as of September 30, 2026, the Company’s deferred tax assets are offset against its deferred tax liabilities and a net deferred tax liability of $5.6 million is reflected in the unaudited condensed balance sheet. The Company’s assessment of the realizability of its deferred tax assets is subject to change, and its net deferred tax position may fluctuate significantly from period to period with changes in the fair value of its digital assets.