Note 15 - Income Taxes

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Income Tax Disclosure [Text Block]

NOTE 15: INCOME TAXES

During both the three and nine months ended September 30, 2022, the Company recorded a tax expense of $15,573 as a result of a valuation allowance for certain deferred tax assets due to a change in the estimation for taxable income of its Israeli operations for future years.

In assessing the recoverability of its deferred tax assets, including withholding tax assets that the Company will be able to utilize, the Company evaluates the available objective positive and negative evidence to estimate whether it is more likely than not that sufficient future taxable income will be generated to permit use of existing deferred tax assets in each taxpaying jurisdiction. For any deferred tax asset in excess of the amount for which it is more likely than not that the Company will realize a benefit, the Company establishes a valuation allowance.

As of September 30, 2022, based on the weight of available positive and negative evidence, the Company recorded a valuation allowance for certain deferred tax assets (including withholding tax assets) of its Israeli subsidiary due to uncertainty regarding its future taxable income. In assessing the realizability of deferred tax assets, the key assumptions used to determine positive and negative evidence included the Company’s cumulative taxable loss for the past three years, current trends related to actual taxable earnings or losses, and expected future reversals of existing taxable temporary differences, as well as projections for future annual results. Accordingly, the Company recorded a charge of $15,573 during the third quarter and first nine months of 2022 as a reserve against its deferred tax assets.

The amount of the deferred tax assets considered realizable, and the associated valuation allowance, could be adjusted in a future period if estimates of future taxable income change or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as projections for future growth.

During the three and nine months ended September 30, 2022, the change in the gross amount of unrecognized tax benefits and accrued interest and penalties was not significant.