Annual report [Section 13 and 15(d), not S-K Item 405]

Note 16 - Income Taxes

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Note 16 - Income Taxes
12 Months Ended
Dec. 31, 2024
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

16.                

Income taxes

 

Loss before income tax expense consists of the following (in thousands):

 

   

Year ended December 31,

 
   

2024

   

2023

 

US

  $ (24,552 )   $ (23,938 )

Foreign

           

Total

  $ (24,552 )   $ (23,938 )

 

The components of the provision for income tax expense consist of the following (in thousands):

 

   

Year ended December 31,

 
   

2024

   

2023

 

Current

               

Federal

  $     $  

State

    3       2  
                 

Deferred

               

Federal

           

State

           

Total provision for income taxes

  $ 3     $ 2  

 

Reconciliation of the statutory federal income tax rates consist of the following:

 

   

Year ended December 31,

 
   

2024

   

2023

 

Tax at federal statutory rate

    21.00 %     21.00 %

State tax, net of federal benefit

    (0.01 )%     (0.01 )%

Valuation allowance

    (19.81 )%     (19.95 )%

Disallowed executive compensation

    (0.05 )%     (1.45 )%

Equity compensation

    (1.50 )%     0.08 %

Other

    0.36 %     0.32 %

Provision for taxes

    (0.01 )%     (0.01 )%

 

The components of deferred tax assets (liabilities) included on the consolidated balance sheets are as follows (in thousands):

 

   

As of December 31,

 
   

2024

   

2023

 

Deferred tax assets

               

Capitalized start-up costs

  $ 2,233     $ 2,538  

Credits

    577       492  

Fixed assets

    912       896  

Net operating losses

    40,380       36,287  

Others

    2,846       1,891  

Total gross deferred tax assets

    46,948       42,104  

Valuation allowance

    (46,928 )     (42,057 )

Total gross deferred tax assets (net of valuation allowance)

  $ 20     $ 47  
                 

Deferred tax liabilities

               

Patents

  $ (20 )   $ (47 )

Other

           

Total gross deferred tax liabilities

    (20 )     (47 )

Net deferred tax assets

  $     $  

 

Based on the available objective evidence at this time, management believes that it is more-likely-than-not that the net deferred tax assets of the Company will not be realized. Accordingly, management has applied a full valuation allowance against net deferred tax assets at both  December 31, 2024 and December 31, 2023. The net valuation allowance increased by approximately $4.9 million during the year ended  December 31, 2024. The increase in net valuation allowance primarily relates to net operating losses generated during 2024.

 

As of  December 31, 2024, the Company has total net operating loss carryforwards of $190.9 million for federal income tax purposes. Approximately $25.2 million of the federal net operating losses will begin to expire in December 31, 2034, if not utilized. Approximately $165.7 million of the federal net operating losses were generated after December 31, 2017, and thus do not expire.  As of December 31, 2024, the Company has state net operating loss carryforwards of $4.1 million, which will begin to expire in December 31, 2034.

 

Utilization of the Company’s net operating loss may be subject to substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such an annual limitation could result in the expiration of net operating loss carryforwards prior to utilization.

 

At  December 31, 2024, the Company had research and development credits carryforward of approximately $0.6 million and $0.5 million for Federal and California income tax purposes, respectively. If not utilized, the Federal research and development credits carryforward will begin to expire on  December 31, 2034. The California credits can be carried forward indefinitely.

 

Effective January 1, 2022, the Company is subject to mandatory capitalization of Section 174 research and development expenditures. The capitalized expenditures are subject to amortization over five years for expenses incurred within the U.S. The Company capitalized $3.5 million and $3.6 million during the years ended December 31, 2024 and December 31, 2023, respectively.

 

The Company’s policy is to account for interest and penalties as income tax expense. As of  December 31, 2024, the Company had no interest related to unrecognized tax benefits. No amounts of penalties related to unrecognized tax benefits were recognized in the provision for income taxes.

 

The Company maintains liabilities for uncertain tax positions. These liabilities involve considerable judgement and estimation and are continuously monitored by management based on the best information available, including changes in tax regulations, the outcome of relevant court cases, and other information. The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits as income tax expense. At  December 31, 2024, the Company’s total amount of unrecognized tax benefit was approximately $0.5 million, none of which will affect the effective tax rate, if recognized. The Company does not expect its unrecognized benefits to change materially over the next twelve months.

 

The Company files income tax returns with the United States federal government and the State of California. The Company’s tax returns for 2021 to 2023 remain open to audit for Federal and California purposes.