Note 10 - Income Taxes

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Income Tax Disclosure [Text Block]

10.         Income Taxes

The provision for income tax (benefit) expense consists of the following (in thousands):

	For the Year		For the Year
	Ended		Ended
	December 31, 2023		December 31, 2022
Current:
Federal	$	-	$	-
State		45		24
Total current		45		24
Deferred:
Federal		-		-
State		-		-
Total deferred		-		-
Income tax expense from continuing operations	$	45	$	24

A reconciliation of the difference between the federal statutory income tax rate and the effective income tax rate follows:

	For the Year			For the Year
	Ended			Ended
	December 31, 2023			December 31, 2022
Federal statutory rate		21.0	%		21.0	%
State tax, net of federal benefit		(5.0	)		0.5
Deferred correction – State net operating losses		8.3			(0.8	)
Prior period accrual adjustment		65.9			-
State tax credits true-up		-			-
Permanent differences		(0.5	)		-
Change in valuation allowance		(96.7	)		(19.8	)
Other, net		1.2			(0.9	)
Effective income tax rate		(5.8	)%		0.0	%

The income tax effects of temporary differences that comprise deferred tax assets and liabilities at December 31, 2023 and 2022 follows (in thousands):

	At			At
	December 31, 2023			December 31, 2022
Noncurrent deferred tax assets:
Equity method investment	$	448		$	400
Goodwill		916			456
Right of use asset		148			146
Other accrued expenses		22			7
Notes receivable fair value adjustment		708			708
Employee benefits		-			2
Capital loss carryforward		11			11
Bad debt expense		-			55
Net operating loss		7,582			7,354
Gross non-current deferred tax assets		9,835			9,139
Noncurrent deferred tax liabilities:
Property, plant, and equipment		(24	)		(39	)
Non-taxable dividends		(664	)		(664	)
Lease liability		(150	)		(148	)
Gain on remeasurement of acquisition		(847	)		(847	)
Valuation allowance		(8,150	)		(7,441	)
Gross non-current deferred tax liabilities		(9,835	)		(9,139	)
Net noncurrent deferred tax assets	$	-		$	-

The Company has U.S. federal net operating loss carryforwards of approximately $33.5 million which are available to reduce future taxable income. The federal net operating loss carryforwards will begin expiring in 2033. We have combined state net operating loss carryforwards of $25.7 million that will expire at various times beginning in 2027.

During 2023 and 2022, we recorded a non-cash credit to our valuation allowance of approximately $709,000 and $299,000, respectively, against our deferred tax assets. The primary assets which are covered by this valuation allowance are employee benefits and net operating losses in excess of the amounts which can be carried back to prior periods. The valuation allowance was calculated in accordance with the provisions of ASC Topic 740, Income Taxes, which requires an assessment of both positive and negative evidence when measuring the need for a valuation allowance. Our results over the most recent four-year period were heavily affected by our business restructuring activities. Our cumulative loss during that period represented sufficient negative evidence to require a valuation allowance. We intend to maintain a valuation allowance until sufficient positive evidence exists to support its reversal, resulting in no deferred tax asset balance being recognized. Should we determine that we will not be able to realize all or part of our deferred tax asset in the future, an adjustment to the deferred tax asset will be charged to income in the period such determination is made.

The unrecognized tax benefits activity for the years ended  December 31, 2023 and 2022 follows (in thousands):

	For the Year		For the Year
	Ended		Ended
	December 31,		December 31,
	2023		2022
Unrecognized tax benefits balance at January 1	$	31	$	31
Gross decrease in tax positions of prior years		-		-
Unrecognized tax benefits balance at December 31	$	31	$	31

Total amount of unrecognized tax benefits that would affect our effective tax rate if recognized is $31,000 at both December 31, 2023 and 2022. The 2016 through 2022 tax years remain open to examination by major taxing jurisdictions.