Note 10 - Income Taxes

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Income Tax Disclosure [Text Block]

NOTE 10 – INCOME TAXES

The provision for income taxes consists of an amount for taxes currently payable and a provision for tax consequences deferred to future periods. Deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The Company incurred zero income tax expense during the years ended December 31, 2023, and December 31, 2022, due to losses in both years.

Actual income tax benefit differs from statutory federal income tax benefit as follows:

	Year Ended December 31,
	2023			2022
Statutory federal income tax benefit	$	2,936,633		$	5,404,903
State tax benefit, net of federal taxes		599,958			856,735
Foreign tax benefit		-			-
Foreign operations tax rate differential		-			-
State rate adjustment		(125,150	)		(7,795,184
Nondeductible/nontaxable items		121,708			(7,709	)
Goodwill impairment		-			(1,654,212	)
NOL and deferred only adjustments		(59,913,532	)		(1,149,895	)
Other		(5,182	)		89,162
Valuation allowance decrease		56,385,565			4,256,200
Total income tax benefit	$	-		$	-

Deferred taxes consist of the following:

	December 31, 2023			December 31, 2022
Deferred tax assets:
Noncurrent:
Inventory	$	-		$	-
Compensation accruals		87,131			150,168
Accruals and reserves		204,083			254,213
Deferred revenue		36,169			51,198
Charitable contribution carryover		1,724			1,766
Derivatives		349			3,192
Intangibles		852,414			1,191,874
Capitalized R&D		919,789			635,862
Depreciation		59,511			-
Lease liabilities		703,026			6,925
NQSO compensation		627,997			1,625,108
NOL and credits		21,737,285			77,042,831
Total deferred tax assets		25,229,478			80,963,137
Deferred tax liabilities:
Noncurrent:
Depreciation		-			(39,213	)
Lease right-of-use assets		(691,119	)		-
Total deferred tax liabilities		(691,119	)		(39,213	)
Net deferred tax assets		24,538,359			80,923,924
Less: valuation allowance		(24,538,359	)		(80,923,924	)
Total	$	-		$	-

The Company has determined, based upon its history, that it is probable that future taxable income may be insufficient to fully realize the benefits of the NOL carryforwards and other deferred tax assets. As such, the Company has determined that it is more likely than not that it will not realize its deferred tax assets.

Pursuant to the Internal Revenue Code of 1986, as amended (the “Code”) Sections 382 and 383, annual use of a company’s NOL and research and development credit carryforwards may be limited if there is a cumulative change in ownership of greater than 50% within a three-year period. The amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years.

During the year-ended December 31, 2023, the Company completed an assessment of the available NOL and tax credit carryforwards under Section 382 and 383 and determined that the Company underwent several ownership changes during the period from 2008 to 2022. The Company has adjusted its NOL and tax credit carryforwards to reflect the limitations resulting from the identified ownership changes. The Company reduced its available gross federal and state NOL carryforwards by $237,816,096 and $178,311,455, respectively, and recorded a reduction of $49,941,380 and $7,344,800, respectively, to the federal and state deferred tax asset, each of which related to losses generated for the years ended December 31, 2022, and prior. Accordingly, the NOL and tax credit carryforwards presented above for the year ended December 31, 2023, were reduced by $57,446,259, with a corresponding reduction to the valuation allowance.  The Company has recorded the adjustments noted above in 2023 as an out-of-period adjustment and concluded that the adjustments were not material to the 2022 consolidated financial statements and evaluated the recording of this prior year item in the current period and concluded that the net accounting impact is not material to the 2023 consolidated financial statements.

As of December 31, 2023, the Company had $86,840,808 of NOLs to reduce future federal taxable income, the majority of which are expected to be available for use in 2024, subject to the Section 382 limitation described above. The federal NOLs of $43,354,286 begin to expire in 2024 if unused and $43,486,522 will carry forward indefinitely. The Company also had $59,425,348 of NOLs to reduce future state taxable income as of December 31, 2023. The state NOLs will begin to expire in 2024 if unused. The Company's net deferred tax assets, which include the NOLs, are subject to a full valuation allowance. As of December 31, 2023, the federal and state valuation allowances were $20,558,729 and $3,979,630, respectively.

As of December 31, 2022, prior to the Section 382 analysis, the Company had $316,548,085 of NOLs to reduce future federal taxable income, the majority of which were expected to be available for use in 2023. The federal NOLs of $254,897,407 were to begin to expire in 2023 if unused and $60,829,929 were to carry forward indefinitely. Prior to the Section 382 state analysis, the Company also had $232,097,127 of NOLs to reduce future state taxable income at December 31, 2022. As of December 31, 2022, the federal and state valuation allowances were $66,733,005 and $14,190,055, respectively.

Tax years after 2003 remain open to examination by federal and state tax authorities due to unexpired NOL carryforwards.

The Company reviews income tax positions expected to be taken in income tax returns to determine if there are any income tax uncertainties. The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax positions will be sustained on examination by taxing authorities, based on technical merits of the positions. The Company has identified no income tax uncertainties. Due to the existence of the valuation allowance, changes in the Company’s unrecognized tax benefits are not expected to impact the Company’s effective tax rate.

The Company recognizes interest and penalties on unrecognized tax benefits as well as interest received from favorable tax settlements within income tax expense. As of December 31, 2023, and 2022, the Company recorded no accrued interest or penalties related to uncertain tax positions.