v3.25.4
Note 9 - Income Taxes
 12 Months Ended
Dec. 31, 2025
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

9. Income Taxes

 

The components of loss before income taxes are as follows (in thousands):

 

        Years Ended December 31,  
   

2025

    

2024

  

United States

   $ 1,178     $ (26,313 )

Foreign

     (46,483 )     (12,250 )

Total

   $ (45,305 )   $ (38,563 )

 

The components of the provision for income taxes are as follows for the years ended December 31, 2025, and 2024 (in thousands):

 

   

Years Ended December 31,

  

Current

  

2025

    

2024

  

Federal

   $ 153     $ (49 )

Foreign

     77       17  

Total

     230       (32 )

Deferred

                

Federal

     5       -  

Total

     5       -  
                 

Total income tax expense (benefit)

   $ 235     $ (32 )

 

The following is a reconciliation from the Company's statuary rate to the effective tax rate reported in the financial statements for the year ended December 31, 2025:

 

   

Amount

(in thousands)

    

Percentage

  

Tax expense at statutory rate

   $ (6,796 )     15.00 %

State and local income taxes, net of federal benefit of state

     -       0.00 %

Section 162(m) Executive Compensation

     4,368       -9.64 %

Tax rate differential

     1,819       -4.02 %

R&D Credit

     (1,294 )     2.86 %

Foreign deferred provision - Deferred true-ups

     520       -1.15 %

Foreign deferred provision - Valuation Allowance

     (5,789 )     12.78 %

Other

     75       -0.16 %

Total US

     (301 )     0.67 %
                 

Federal Law Changes

     -       0.00 %

Total Effect of Cross-Border Tax Laws

     727       -1.60 %

Tax Credits (Federal)

     -       0.00 %

Valuation Allowance (Federal)

     7,297       -16.11 %
                 

Deduction for Foreign Affiliate Property Income (FAPI)

     (611 )     1.35 %

FX Loss

     (500 )     1.10 %

Other

     59       -0.13 %

Non-Deductible or Non-Taxable Items

     (1,052 )     2.32 %

Unrecognized Tax Benefits

     360       -0.79 %

Other Adjustments

     -       0.00 %

Total

   $ 235       -0.52 %

 

The Company's effective tax rate for the year ended December 31, 2025 and December 31, 2024 were -0.52% and 0.08%, respectively. For the year ended December 31, 2025, the primary drivers of the variance from the statutory rate were losses in jurisdictions for which a valuation allowance is recorded and a benefit may not be recognized. For the year ended December 31, 2024, the primary drivers of the variance from the statutory rate were losses in jurisdictions for which a valuation allowance is recorded and a benefit may not be recognized.

 

 

For the year ended December 31, 2025, a majority of the Company's state income tax expense relates to Texas.

 

The tax effect of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases that give rise to deferred tax assets and liabilities is as follows:

 

   

2025

    

2024

  

Net operating loss carryforwards

   $ 15,184     $ 2,799  

Research and other credits

     10,350       9,150  

Stock based compensation

     1,784       1,760  

Capitalized research expenses

     6,404       12,654  

Accrued liabilities

     347       414  

Deferred tax assets before valuation allowance

     34,069       26,777  

Valuation allowance

     (33,891 )     (26,382 )

Deferred tax assets

     178       395  
                 

Depreciation

     112       323  

Prepaid assets

     71       72  

Deferred tax liability

     183       395  

Net deferred tax asset (liability)

   $ (5 )   $ -  

 

For the year ended December 31, 2025, the Company has federal, state post-apportioned, and foreign net operating loss carryforwards of $2.1 million, $0 and $54.6 million, respectively. Of the federal amount, none have a limited carryforward period and will expire; $2.1 million will have an indefinite carryforward period. Of the foreign amount, $54.6 million has a limited carryforward period and will begin to expire in 2044. These credits are presented in the financial statements net of $439 thousand of related uncertain tax positions. As of December 31, 2024, credits were presented in the financial statements net of $2.1 million of related uncertain tax positions. In accordance with Section 382 and Section 383, utilization of the NOL and tax credit carryforwards may subject to limitations based on prior or future ownership changes. Additionally, after weighing up all available and positive and negative evidence for the period ended December 31, 2025, the Company has determined a full valuation allowance for all jurisdictions was necessary.                  

 

For the year ended December 31, 2025, the Company considers all foreign earnings to be permanently reinvested.

 

 

The Company is subject to income tax in multiple jurisdictions, including Canada, USA, and the state of Texas. The Company has Canadian, USA, and Texas income tax returns that are open to examination for the 2022, and 2021 tax years, respectively. In addition, the utilization of tax carryforwards, from years prior to those previously mentioned may also be audited by the taxing authorities once utilized. As a result, the Company continuously monitors its current and prior filing positions in order to determine if any unrecognized tax positions need to be recorded. The analysis involves considerable judgement and is based on the best information available. A reconciliation of the beginning and ending amount of unrecognized tax benefits as of December 31, 2025 and 2024 are as follows (in thousands):

 

   

Years Ended December 31,

  
   

2025

    

2024

  

Balance as of January 1

   $ 3,434     $ 2,973  

Additions based on tax positions related to the current year

     329       660  

Additions for tax positions of prior years

     6       106  

Reductions for tax positions of prior years

     (1 )     -  

Reductions related to settlements

     -       (305 )

Reductions from lapse of statute of limitations

     (52 )     -  

Balance at December 31

   $ 3,716     $ 3,434  

 

 

The Company has accrued interest expense and penalties related to the unrecognized tax benefits for the periods ended December 31, 2025 and 2024 of $414 thousand and $337 thousand, respectively. As of December 31, 2025, the unrecognized tax benefits would, if recognized, impact our effective tax rate.

 

 

The following summarizes the Company's tax payments and refunds by jurisdiction (in thousands).

 

 

Income Tax Paid (Refunded)

  

Years Ended December 31, 

  
   

2025

    

2024

  

Texas

   $ 2     $ 2  

Canada

     (83 )     85  

Total

   $ (81 )   $ 87