Note 9 - Income Taxes

6 Months Ended

Jun. 30, 2024

Notes to Financial Statements

Income Tax Disclosure [Text Block]

9. Income Taxes

The Company had a tax net loss for the three and six months ended June 30, 2024 and 2023, and therefore has recorded no assessment of current federal income taxes. The Company is subject to minimum state taxes for various jurisdictions as well as subject to franchise taxes considered income taxes under Accounting Standards Codification ("ASC") 740, Income Taxes. A reconciliation of income tax expense at the federal statutory rate to the income tax provision at the Company's effective rate is as follows:

	Six Months Ended
	June 30, 2024			June 30, 2023
Income tax benefit at statutory rates	$	229,541		$	1,604,134
Valuation allowance for deferred tax assets		(626,845	)		(1,625,391	)
Stock-based compensation		380,270			(17,634	)
Other expense, net		(25,447	)		25,719
Reported income tax expense	$	(42,481	)	$	(13,172	)
Effective tax rate:		3.5	%		0.2	%

The Company’s deferred tax assets consisted of the following as of:

	June 30, 2024			December 31, 2023
Deferred tax assets:
Net operating loss carryforwards	$	20,625,634		$	20,088,873
Intangible assets		2,176,271			2,258,079
Property and equipment		1,060,272			1,104,854
Research and development credits		251,540			235,514
Research and development		246,410			268,414
Inventory		339,365			246,182
Accrued expenses		518,546			496,695
Right of use asset		10,364			7,366
Bad debt allowance		98,301			64,250
Charitable contributions		34,487			40,773
Unexercised options		1,109,065			890,128
Total deferred tax assets		26,470,255			25,701,128
Valuation allowance		(26,470,255	)		(25,701,128	)
Total net deferred tax assets	$	—		$	—

As of  June 30, 2024, the Company did not provide a current or deferred U.S. federal income tax provision or benefit for any of the periods presented because the Company has reported cumulative losses since inception. The Company has recorded a provision for state income taxes and a corresponding current state income tax payable of approximately $3,598 and $7,373 as of  June 30, 2024 and December 31, 2023, respectively. 

As of  June 30, 2024 and December 31, 2023, the Company had aggregate net operating losses ("NOLs") totaling approximately $140.5 million and $136.8 million, respectively. As of  June 30, 2024 and December 31, 2023, the Company had federal NOLs totaling approximately $1.9 million from 2017 and prior years that can be carried forward for 20 years and which begin to expire in 2036. As of  June 30, 2024 and December 31, 2023, the Company had federal NOLs totaling approximately $79.9 million and $77.8 million, respectively, from 2018 and subsequent years that can be carried forward indefinitely. As of  June 30, 2024 and December 31, 2023, the Company had state NOLs totaling $57.7 million and $57.1 million, respectively, that can be carried forward for between 15 and 20 years. As of  June 30, 2024 and December 31, 2023, the Company had credits totaling $0.3 million and $0.2 million, respectively, that can be carried forward for five years. As of  June 30, 2024 and December 31, 2023, the Company had other carryforwards totaling $0.6 million that can be carried forward for between one and five years.

The use of net operating losses  may be subject to certain limitations, such as those triggered by ownership changes under Section 382 of the Internal Revenue Code. Because these provisions, the use of a portion of the Company's NOLs and tax credit carryforwards  may be limited in future periods. Further, a portion of the carryforwards  may expire before being applied to reduce future income tax liabilities.

The Company assesses its deferred tax assets and liabilities to determine if it is more likely than not, they will be realized; if not, a valuation allowance is required to be recorded. Management has determined it is more likely than not that the deferred tax assets would not be realized, thus a full valuation allowance was recorded against the deferred tax assets. The Company  may reduce the valuation allowance against definite-lived deferred tax assets at such a time when it becomes more likely than not that the definite-lived deferred tax assets will be realized. The change in the valuation allowance for deferred tax assets and liabilities for the six months ended June 30, 2024 and 2023 were net increases of $0.8 million and $1.8 million, respectively.

GAAP requires management to evaluate and report information regarding its exposure to various tax positions taken by the Company. The Company has determined whether there are any tax positions that have met the recognition threshold and has measured the Company’s exposure to those tax positions. Management believes that the Company has adequately addressed all relevant tax positions and that there are no unrecorded tax liabilities. 

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. U.S. and state jurisdictions have statutes of limitations that generally range from 3 to 5 years.