Note 6 - Income Taxes

9 Months Ended

Sep. 30, 2025

Notes to Financial Statements

Income Tax Disclosure [Text Block]

6. Income Taxes

Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

The Company does not expect to pay any significant federal, state, or foreign income taxes in 2025 as a result of the losses recorded during the three and nine months ended September 30, 2025 and the additional losses expected for the remainder of 2025 and cumulative net operating loss carryforwards. Accounting standards require the consideration of a valuation allowance for deferred tax assets if it is “more likely than not” that some component or all of the benefits of deferred tax assets will not be realized. As a result, as of September 30, 2025 and  December 31, 2024 the Company maintained a full valuation allowance for all deferred tax assets.

The Company recorded no income tax provision for the three and nine months ended September 30, 2025 and 2024, respectively. The effective tax rate for the nine months ended September 30, 2025 and 2024 is nil. The income tax rates vary from the federal and state statutory rates primarily due to the change in fair value of the stock warrants, Internal Revenue Code Section 162(m) limitations and ISO activity, as well as the valuation allowances on the Company’s deferred tax assets. The Company estimates its annual effective tax rate at the end of each quarterly period. Jurisdictions with a projected loss for the year where no tax benefit can be recognized due to the valuation allowance could result in a higher or lower effective tax rate during a particular quarter depending on the mix and timing of actual earnings versus annual projections. 

On July 4, 2025, the United States enacted tax reform legislation through the One Big Beautiful Bill Act, which changes existing US tax laws, including extending or making permanent certain provisions of the Tax Cuts and Jobs Act, repealing certain clean energy initiatives, in addition to other changes. The Company continues to evaluate the impact the new legislation will have on the consolidated financial statements, but does not anticipate a significant impact due to the Company’s valuation allowance position.