v3.26.1
Note 8 - Income Taxes
 12 Months Ended
Dec. 31, 2025
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

NOTE 8 – INCOME TAXES

 

Deferred taxes are recorded based upon differences between the financial statement and tax basis of assets and liabilities and available carryforwards. Temporary differences and carryforwards which gave rise to a significant portion of deferred tax assets and liabilities as of December 31, 2025 and 2024 are as follows (dollars in thousands):

 

 


 

  

December 31,

 
  

2025

  

2024

 
         

Deferred tax assets:

        

Net operating losses

 $87,976  $82,076 

Fixed asset basis difference

  4,934   4,839 

Contributions carryover

  163   43 

Deferred compensation

  306   332 

Accrued liabilities and other

  2,132   980 
         

Total deferred tax assets

  95,511   88,270 
         

Valuation allowance for deferred tax assets

  (95,511)  (88,270)
         

Net deferred tax asset

 $-  $- 

 

The change in deferred tax assets resulted from current year net operating losses and changes to future tax deductions resulting from expiring net operating losses, terms of stock compensation plans, fixed assets, and accrued liabilities.  A full valuation allowance continues to be recorded given the Company continues to be incurring losses.

 

As of December 31, 2025, the Company had net operating loss (NOL) carryforwards of approximately $376 million for federal income tax purposes and $358 million for California income tax purposes. Such carryforwards expire in varying amounts through the year 2037 and 2045 for federal and California purposes, respectively. For federal losses arising in tax years ending after December 31, 2017, the NOL carryforwards are allowed indefinitely. Use of the carryforward amounts is subject to an annual limitation as a result of a previous ownership change and a tax ownership change that occurred in June of 2021.

 

The Company’s tax years 2022 through 2025 remain subject to examination by the Internal Revenue Service, and tax years 2021 through 2025 remain subject to examination by California tax jurisdictions. In addition, the Company’s loss carryforward amounts are generally subject to examination and adjustment for a period of three years for federal tax purposes and four years for California purposes, beginning when such carryovers are utilized to reduce taxes in a future tax year.

 

Beginning in 2025 annual reporting, we adopted Accounting Standards Update (ASU) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09) on a prospective basis. A reconciliation of the U.S. federal statutory income tax rate to our effective tax rate pursuant to the disclosure requirements of ASU 2023-09 for the year ended December 31, 2025 is as follows (in thousands, except percentages):

 

 

  

Year Ended December 31, 2025

 
         

US federal statutory income tax rate

 $(7,169)  21.0%

State and local income taxes, net of federal income tax effect(1)

  11   (0.0)

Valuation allowance

  5,249   (15.4)

Expiring carryforwards

  745   (2.2)

Non-deductible expenses and other

  1,175   (3.4)
         

Effective tax rate

 $11   0.0%
        
(1)  California represents the full tax effect in this category.        

 

A reconciliation of the U.S. federal statutory income tax rates to our effective tax rate for the years ended December 31, 2024 is as follows (in thousands, except percentages):

 

  

Year Ended December 31, 2024

 
         

US federal statutory income tax rate

 $(6,537)  21.0%

State and local income taxes, net of federal income tax effect(1)

  11   (0.0)

Valuation allowance

  4,942   (15.9)

Expiring carryforwards

  716   (2.3)

Non-deductible expenses and other

  879   (2.8)
         

Effective tax rate

 $11   0.0%
        
(1)  California represents the full tax effect in this category.        

 

Cash paid for income taxes, net of refunds received, by jurisdiction pursuant to the disclosure requirements of ASU 2023-09 for the year ended December 31, 2025 and 2024 are as follows (in thousands):

 

  

Year Ended December 31, 2024

 
  2025  2024 
         

Federal

 $-   - 

State

  11   11 
         

Cash paid for income taxes, net of refunds received

 $11  $11 

 

Because it is more likely than not that the Company will not realize its net deferred tax assets, it has recorded a full valuation allowance against these assets. Accordingly, no deferred tax asset has been recorded in the accompanying balance sheet.

 

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA or the Act) was enacted.  Changes to bonus depreciation, interest expense limitations and domestic research and development expenses (among others) were implemented in the Act. The Company does not believe that the enactment of the OBBBA will have a material impact on its income tax expense or deferred tax assets.