Note 15 - Income Taxes

12 Months Ended

Dec. 31, 2024

Notes to Financial Statements

Income Tax Disclosure [Text Block]

NOTE 15.     INCOME TAXES

Components of income tax (benefit) expense are as follows:

	December 31,			December 31,
(In thousands)	2024			2023
Current:
Federal	$	—		$	(2,646	)
State		24			29
Foreign		228			185
		252			(2,432	)
Deferred:
Federal		(3,669	)		(3,386	)
State		(585	)		(989	)
		(4,254	)		(4,375	)
Valuation allowance		4,254			4,375
Total income tax (benefit) expense	$	252		$	(2,432	)

Below is a reconciliation of the statutory federal income tax rate to the Company's effective tax rate:

	Year Ended December 31,
	2024			2023
Federal tax provision		21.0	%		21.0	%
State taxes (net of federal benefit)		2.5	%		4.6	%
Valuation allowance		(18.3	)%		(20.6	)%
Incentive stock compensation expense		(1.4	)%		(1.8	)%
Section 162(m) compensation		(1.2	)%		(1.4	)%
GILTI		(1.9	)%		(1.9	)%
Uncertain tax positions		—	%		9.8	%
Other		(1.8	)%		1.7	%
Total		(1.1	)%		11.4	%

Major components of the Company’s deferred tax assets (liabilities) are as follows:

	December 31,			December 31,
(In thousands)	2024			2023
Deferred tax assets:
Loss and credit carryforwards	$	12,126		$	8,771
Stock-based compensation		2,524			2,890
Research and development capitalization		2,890			2,178
Lease liabilities		1,153			1,276
Accrued insurance deductibles		653			798
Interest expense limitation		1,429			599
Accrued bonuses		—			408
Deferred revenue		310			325
Inventory 263A adjustment		157			231
Other		814			556
Total deferred tax assets		22,056			18,032
Valuation allowance		(20,697	)		(16,443	)
Total deferred tax assets, net of valuation allowance		1,359			1,589
Deferred tax liabilities:
Lease right-of-use assets		(1,116	)		(1,253	)
Property and equipment		(134	)		(165	)
Other		(109	)		(171	)
Total deferred tax liabilities		(1,359	)		(1,589	)
Net deferred tax assets	$	—		$	—

The Company considers all positive and negative evidence regarding the realization of deferred tax assets, including past operating results and future sources of taxable income.

The Company considers the earnings of Apyx Bulgaria, EOOD to be indefinitely invested outside the United States on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and our specific plans for reinvestment of those subsidiary earnings. It has not recorded a deferred tax liability related to the U.S. Federal and State income taxes and foreign withholding taxes on the undistributed earnings of Apyx Bulgaria, EOOD indefinitely invested outside the United States. If it decides to repatriate the foreign earnings, the Company will need to adjust its income tax provision in the period it determines that the earnings will no longer be indefinitely invested outside the United States. 

The Company assesses the financial statement impact of an uncertain tax position taken or expected to be taken on an income tax return at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized in the financial statements unless it is more likely than not of being sustained. As of December 31, 2024 and 2023, the Company has no uncertain tax positions.

The Company is subject to U.S. federal and state income tax examination. The Company’s 2021 through 2023 U.S. federal income tax returns are subject to examination by the Internal Revenue Service (“IRS”). The Company’s state income tax returns are subject to examination for the 2020 through 2023 tax years.

During 2022, the Company was notified by the IRS that it was examining the Company’s 2018, 2019 and 2020 federal income tax returns. During January 2023, the Company was notified that the examination process was complete and that the Company's tax refunds were approved for substantially the amount recorded in the Company's Consolidated Balance Sheet at December 31, 2022. On August 10, 2023, the Company received $8.1 million from the IRS, which included approximately $0.4 million of interest on the $7.7 million of income tax refunds. In the examination, the Company's uncertain tax positions were accepted by the IRS as submitted on our income tax returns and the Company reversed its uncertain tax positions in January 2023.