v3.26.1
Note 17 - Income Taxes
 12 Months Ended
Dec. 31, 2025
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

NOTE 17. INCOME TAXES

 

For the years ended December 31, 2025 and 2024, loss before provision for income taxes consisted of the following (in thousands):

 

   

For the years ended

December 31,

  
   

2025

    

2024

  

United States

   $ (33,222

)

   $ (8,750

)

International

     —       —  
    $ (33,222

)

   $ (8,750

)

 

For the years ended December 31, 2025 and 2024, the federal and state income tax provision is summarized as follows (in thousands):

 

   

For the years ended

December 31,

  
   

2025

    

2024

  

Current

                

Federal

   $ —     $ —  

State

     —       —  

Foreign

     —       —  

Other

     —       —  

Total current tax expense

   $ —     $ —  
                 
                 

Deferred

                

Federal

     —       —  

State

     —       —  

Foreign

     —       —  

Other

     —       —  

Total deferred tax expense

   $ —     $ —  
                 

Income tax provision

   $ —     $ —  

 

Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating losses and tax credit carryforwards.

 

For the year ended December 31, 2025, the Company recorded income tax expense of approximately $244 thousand, which was entirely attributable to discontinued operations. As a result, no income tax expense was recorded for continuing operations. 

 

The tax effects of significant items comprising the Company's deferred taxes as of December 31, 2025 and 2024 are as follows (in thousands):

 

   

For the years ended

December 31,

  
   

2025

    

2024

  

Deferred tax assets:

                

Net operating losses

   $ 647     $ 40,689  

Stock options

     474       573  

Operating lease liabilities

     213       245  

Property and equipment

     23       18  

Accruals

     248       311  

Research and development credits

     —       641  

Other deferred tax assets

     6       6  

Total deferred tax assets

     1,611       42,483  
                 

Deferred tax liabilities:

                

Operating lease right-of-use assets

     (213 )     (245 )

Total deferred tax liabilities

     (213 )     (245 )
                 

Valuation allowance

     (1,398 )     (42,238 )

Net deferred taxes

   $ —     $ —  

 

ASC 740, Income Taxes, requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the Company's ability to generate sufficient taxable income within the carryforward period. Because of the Company's history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a valuation allowance.

 

The valuation allowance decreased by $41.0 million and increased by $1.9 million during the years ended December 31, 2025 and 2024, respectively. The decrease in the valuation allowance during 2025 primarily reflects the reduction of deferred tax assets associated with pre-change net operating losses and tax credits following the 2025 ownership change under Section 382.

 

Net operating loss and tax credit carryforwards as of December 31, 2025, are as follows (in thousands):

 

         

Expiration
   

Amount

  

Years

Net operating losses, federal

   $ 2,955  

Does Not Expire

Net operating losses, state

   $ 348  

Beginning in 2045

Tax credits, federal

   $ —    

Tax credits, state

   $ —    

 

A reconciliation of the beginning and ending balances of the unrecognized tax benefits during the below years are as follows (in thousands):

 

   

For the years ended

December 31,

  
    2025     2024  

Unrecognized benefit - beginning of period

   $ 974     $ 974  

Change during the period

     (974 )     —  

Unrecognized benefit - end of period

   $ —     $ 974  

 

The entire amount of the unrecognized tax benefits would not impact our effective tax rate if recognized. Accrued interest and penalties related to unrecognized tax benefits are classified as income tax expense and were immaterial for the years ended December 31, 2025 and 2024. The Company files income tax returns in the United States, California and Florida. Other jurisdictions are not significant. The tax years 2005 - 2024 (except 2007 and 2009) remain open in the federal, California and Florida jurisdictions. The Company is not currently under examination by income tax authorities in federal, state or other jurisdictions.

 

Differences between the statutory tax rate and the Company’s effective tax rate for the year ended December 31, 2025 is presented prospectively in accordance with ASU 2023-09 below (in thousands):

 

US Federal Statutory Tax Rate

   $ (6,977 )     21.0 %

State and Local income taxes, net of federal income tax effect

     —       — %

Change in valuation allowance

     (32,214 )     97 %

Limitation of net operating losses and credits due to ownership change

     33,887       (102.0 %)
Nontaxable or non-deductible items:                
Warrant/equity expenses     5,142       (15.5 %)

Other

     162       (0.5 %)

Total

   $ —       — %

 

The effective tax rate of the Company's provision (benefit) for income taxes differs from the federal statutory rate as follows for the year ended December 31, 2024 (prior to the adoption of ASU 2023-09):

 

Statutory rate

     21.0 %

State tax

     3.4 %

Stock-based compensation expense

     (1.0 %)

Change in valuation allowance

     (18.3

%)

Warrant/equity expenses

     (3.3 %)

Expiration of tax attributes

     (1.8

%)

Total

     0.0 %

 

In each year presented above, California comprised the majority of the amounts included in the “State and local income taxes, net of federal income tax effect” line in the rate reconciliation above.

 

Cash paid for income taxes (net of refunds) by jurisdiction during the year ended December 31, 2025 was as follows (in thousands) which is included in other expense, net as part of continuing operations in the Consolidated Statements of Operations:

 

California

   $ 3  

New Jersey

     3  

South Carolina

     2  

New York

     1  

Other

     1  

Total

   $ 10