Note 14 - Income Taxes |
6 Months Ended |
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Jun. 30, 2026 | |
| Notes to Financial Statements | |
| Income Tax Disclosure [Text Block] |
NOTE 14. INCOME TAXES
The provision for income taxes is recorded at the end of each interim period based on the Company's best estimate of its effective income tax rate expected to be applicable for the full fiscal year, adjusted for any discrete items during the quarter. The Company has recorded an income tax (benefit) of $3.5 million and $0 for the three months ended June 30, 2026, and June 30, 2025, respectively. This resulted in a cumulative income tax benefit of $28 thousand for the six months ended June 30, 2026, and $0 for the six months ended June 30, 2025. The income tax provision for discontinued operations is presented separately in Note 13, "Divestitures.” The Company's effective income tax rate was approximately 7.8% for the three months ended June 30, 2026 and 0% for the three months ended June 30, 2025, and was 0% for both the six months ended June 30, 2026 and June 30, 2025. For both the three and six month 2026 periods, the effective rate differs from the statutory rate primarily due to warrant income that is not recognized for income tax purposes and the recording of a valuation allowance against the Company's deferred tax assets. The income tax benefit recognized in the three months ended June 30, 2026 substantially offsets an income tax expense recognized in the three months ended March 31, 2026, resulting in a de minimis net income tax benefit for the six month period.
In accordance with ASC 740-270-30-18, the Company has determined that it is unable to make a reliable estimate of its annual effective tax rate for the year ending December 31, 2026. Small variations in forecasted pre-tax book income produce significant variability in the estimated annual effective tax rate due to the magnitude of non-cash items, including the remeasurement of liability-classified warrants and the recognition of unrealized gains and losses on digital assets measured at fair value. As a result, the Company has computed its income tax provision for the period ended June 30, 2026 using the actual effective tax rate for the year-to-date period, which the Company believes represents the best estimate of the annual effective tax rate.
During the period ended June 30, 2026, the Company recorded a valuation allowance against its U.S. federal and state deferred tax assets. The Company evaluates the realizability of its deferred tax assets each reporting period based on all available positive and negative evidence, including cumulative results in recent years, and the character and timing of reversals of existing taxable temporary differences. As of March 31, 2026, the Company concluded that the existence of taxable temporary differences related to unrealized gains on digital assets provided sufficient positive evidence to conclude that it was more likely than not that its deferred tax assets would be realized. However, during the three months ended June 30, 2026, a decline in the value of the digital assets caused the previously recognized unrealized gain to reverse to an unrealized loss, resulting in a deferred tax asset that is fully offset by a valuation allowance. The Company's assessment of the realizability of its deferred tax assets is subject to change. As the valuation allowance fully offsets the Company's net deferred tax assets, no net deferred tax asset or liability is reflected in the Company's Unaudited Condensed Consolidated Balance Sheets as of June 30, 2026.
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