Note 16 - Income Taxes

12 Months Ended

Dec. 31, 2024

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note 16 -- Income Taxes

Deferred tax assets and liabilities as of December 31, 2024 and 2023 consisted of the following:

	December 31, 2024			December 31, 2023
Deferred tax assets
Net operating losses	$	4,941,593		$	5,786,541
Research and development tax credit		26,818			30,429
Nonqualified stock options		111,915			76,059
Equipment		882			1,402
Goodwill		585,490			590,235
Section 174 Capitalization		157,863			70,437
Intangible assets		982,462			1,043,615
Accrued expenses and other		26,790			103,947
Gross deferred tax assets	$	6,833,813		$	7,702,665
Valuation Allowance		(6,833,813	)		(7,709,820	)
Net deferred tax assets	$	-		$	(7,155	)

As of December 31, 2024, the Company maintained a valuation allowance against certain deferred tax assets to reduce the total to an amount management believed was appropriate. Realization of deferred tax assets is dependent upon sufficient future taxable income during the periods when deductible temporary differences and carryforwards are expected to be available to reduce taxable income.

As of December 31, 2024, the Company has a federal tax net operating loss carryforward of $21,832,273, which will be available to offset future taxable income indefinitely. The Company has net operating loss carryforwards in various states. The net tax effected value of those state net operating loss carryforwards is $6,150,701 in various states. The state net operating loss carryforwards will begin to expire in 2034 and are available to offset future taxable income or reduce taxes payable through 2045. The Company also has net operating loss carryforwards in foreign jurisdictions of approximately $41,100,000 that are reported in discontinued operations. The Company’s ability to utilize these net operating loss carryforwards to offset future taxable income may be subject to certain limitations.

The foreign net operating losses related to operations in Israel and Hong Kong can be carried forward indefinitely. The Company has US federal and state research and development tax credits of $26,818 as of December 31, 2024, that will be available to offset future tax liabilities. Research and development tax credits will begin to expire in 2029.

The provision for (benefit from) income taxes charged to income for the years ended December 31, 2024 and 2023 consist of the following:

	December 31, 2024			December 31, 2023
US current tax (benefit) expense	$	(232	)	$	15,708
Foreign current tax expense		-			-
Provision for income tax expenses (benefit)		-			-
	$	(232	)	$	15,708

A reconciliation between the effective tax rate on income from continuing operations and the statutory tax rate is as follows:

	December 31, 2024			December 31, 2023
Income tax benefit at federal statutory rate		21.0	%		21.0	%
State and local income taxes net of federal tax benefit		2.1	%		0.5	%
Meals and entertainment, non-deductible expenses and tax-exempt income		-0.1	%		-0.1	%
Officer's life insurance		-0.1	%
Club Dues		-0.1	%		0.0	%
Incentive stock option expense		-0.7	%		-0.1	%
Equity reversal		0.9	%		0.0	%
Nondeductible goodwill impairment		0.0	%		-8.2	%
Nondeductible debt expenses		-1.5	%		-8.8	%
Financial statement true up		0.1	%		0.0	%
Miscellaneous other adjustments		-0.8	%		0.0	%
Change in valuation allowance		-21.0	%		-4.3	%
Provision for income tax expenses (benefit)		-0.1	%		0.0	%

The Company has not provided any additional U.S. federal or state income taxes or foreign withholding taxes on the undistributed foreign earnings or basis differences as such differences have been considered indefinitely reinvested in the business. The determination of the amount of the unrecognized deferred tax liability related to the undistributed earnings is not practicable because of the complexities associated with its hypothetical calculation.

The Company files income tax returns in the U.S. federal jurisdiction, Minnesota, and various other states. The Company is not subject to U.S. federal, state and local income tax examinations by tax authorities for years before 2018. The Company also files in Israel, Hong Kong and other foreign jurisdictions. The Company is not subject to audit in periods prior to 2018 in Israel and 2016, in Hong Kong The other foreign jurisdictions have various tax examination periods.

We follow the authoritative guidance on accounting for and disclosure of uncertainty in tax positions which requires us to determine whether a tax position of the Company is more likely than not to be sustained upon examination, including resolution of any related appeals of litigation processes, based on the technical merits of the position. For tax positions meeting the more likely than not threshold, the uncertain tax benefit amount recognized in the financial statements is reduced to the largest benefit that has a greater than 50% likelihood of being realized upon the ultimate settlement with the relevant taxing authority. Interest and penalties related to uncertain tax positions are included in the provision for income taxes in the condensed consolidated statements of operations. In accordance with the Discontinued Operations - Sale of Sports Gaming Client Services and SportsHub Gaming Network (See Note 3), management performed an evaluation of the technical merits of the Israeli Controlled Foreign Corporate Rules to determine the taxability of the gain from the Sale of Business from an Israeli tax perspective. This analysis also considered the results of the U.S. income tax. Management determined that the technical merits for uncertain tax exposure resulting from the gain for Israeli tax purposes did not exceed the more-likely-than-not threshold and has not recorded any income tax liability at December 31, 2024. Management’s determination is based on known facts and circumstances and requires judgment of a complex set of rules and regulations. If facts and circumstances change, such as closing, liquidating or selling of the businesses’ equity that is remaining, including events outside the Company’s control, this could have a material impact on the management’s determination.

The Company recognizes interest and penalties accrued related to unrecognized tax benefits as additional income tax expense. During the years ended December 31, 2024 and 2023, the Company did not recognize material income tax expense related to interest and penalties. The Company’s uncertain tax position balance from continuing operations was $0 at December 31, 2024.