Note 4 - Income Taxes

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note 4 – Income Taxes

A summary of income taxes as follows:

	Year Ended December 31,
	2023		2022		2021
Federal	$	—	$	—	$	—
State		210		282		162
International		—		—		—
	$	210	$	282	$	162

The provisions for income taxes do not bear a normal relationship to loss before income taxes primarily as a result of the valuation allowance on deferred tax assets.

The reconciliation of the statutory federal income tax rate to the Company’s effective tax is presented below:

	Year Ended December 31,
	2023			2022			2021
Tax at federal statutory rate		21.0	%		21.0	%		21.0	%
State taxes, net of federal		1.2	%		3.6	%		7.4	%
Permanent items		5.8	%		3.7	%		30.6	%
Other		(0.4	%)		(0.7	%)		(0.2	%)
State rate change		(1.8	%)		0.5	%		(0.5	%)
Valuation allowance		(26.4	%)		(28.6	%)		(58.8	%)
Effective tax rate		(0.6	%)		(0.5	%)		(0.5	%)

In assessing the realizability of the net deferred tax assets, the Company considers all relevant positive and negative evidence to determine whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The realization of the gross deferred tax assets is dependent on several factors, including the generation of sufficient taxable income prior to the expiration of the net operating loss carryforwards. The Company believes that it is more likely than not that the Company’s deferred income tax assets will not be realized. The Company has experienced taxable losses from inception. As such, there is a full valuation allowance against the net deferred tax assets as of December 31, 2023, 2022 and 2021.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:

	Year Ended December 31,
	2023			2022			2021
Net operating loss	$	105,233		$	85,214		$	73,436
Stock option expense		23,643			18,709			12,169
Property and equipment		(35,756	)		(20,753	)		(14,957	)
Other		5,536			5,920			2,845
Less: Valuation allowance		(98,656	)		(89,090	)		(73,493	)
Net deferred income tax assets	$	-		$	-		$	-

At December 31, 2023, the Company had federal net operating loss (“NOL”) carryforwards of $420.3 million, of which $175.4 million, generated in 2017 and prior, will expire between 2025 and 2037. The NOL generated from 2018 through 2023, of approximately $244.9 million, will have an indefinite carryforward period but can generally only be used to offset 80% of taxable income in any particular year. The Company may be subject to the net operating loss utilization provisions of Section 382 of the Internal Revenue Code. The effect of an ownership change would be the imposition of an annual limitation on the use of NOL carry forwards attributable to periods before the change. The amount of the annual limitation depends upon the value of the Company immediately before the change, changes to the Company’s capital during a specified period prior to the change, and the federal published interest rate. We have completed several analyses under Section 382 of the Code in the past which concluded that certain annual limitations exist. At December 31, 2023, the Company had $312.8 million of state NOLs which expire between 2024 and 2043, and had $20.7 million of foreign NOLs in the United Kingdom which do not expire. 

Entities are also required to evaluate, measure, recognize and disclose any uncertain income tax provisions taken on their income tax returns. The Company has analyzed its tax positions and has concluded that as of December 31, 2023, there were no uncertain positions. The Company’s U.S. federal and state net operating losses have occurred since its inception in 2005 and as such, tax years subject to potential tax examination could apply from that date because the utilization of net operating losses from prior years opens the relevant year to audit by the IRS and/or state taxing authorities.  Interest and penalties, if any, as they relate to income taxes assessed, are included in the income tax provision. The Company did not have any unrecognized tax benefits and has not accrued any interest or penalties through 2023, 2022 and 2021.

The Company considered the impact of the disallowance of certain compensation tax deductions in excess of $1.0 million under Internal Revenue Code Section 162(m); however, to the extent an adjustment to the deferred tax asset is required the impact will be offset by a corresponding adjustment to the valuation allowance.