Note 12 - Income Taxes

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Income Tax Disclosure [Text Block]

12.         Income Taxes

The components for the income tax expense are as follows for the years ended December 31 (in thousands):

	2023		2022
	(in thousands)
Current income taxes
Federal	$	-	$	-
State		-		-
Foreign		196		239
Deferred income taxes		-
Federal		-		-
State		-		-
Foreign		118		79
Total income tax expense	$	314	$	318

The United States and foreign components of loss from operations before taxes are as follows for the years ended December 31 (in thousands):

	2023			2022
	(in thousands)
United States	$	(53,226	)	$	(44,802	)
Foreign		(24,893	)		(30,441	)
Total loss from operations before taxes	$	(78,119	)	$	(75,243	)

Significant components of the Company’s deferred tax assets consist of the following at December 31 (in thousands):

	2023			2022
	(in thousands)
Deferred Tax assets:
Stock-based compensation	$	3,119		$	2,840
Accrued expenses and other		2,666			2,538
Research credit carryforward		2,859			1,341
Fixed assets		319			162
Capitalized start-up costs and other intangibles		644			921
Capitalized research costs		9,064			4,382
Net operating loss carryforwards		93,332			83,908
		112,003			96,092
Valuation allowance		(110,511	)		(94,704	)
Net deferred tax asset		1,492			1,388
Deferred tax liabilities
Fixed assets and other		(1,448	)		(1,214	)
Net deferred tax liability		(1,448	)		(1,214	)
Net deferred tax asset	$	44		$	174

At December 31, 2023 and 2022, the Company has provided a full valuation allowance against its net deferred assets in the U.S., Canada, Italy, Luxembourg, Switzerland, and Taiwan tax jurisdictions, since realization of these benefits is not more likely than not. The valuation allowance increased approximately $15.8 million from the prior year. At December 31, 2023, the Company had U.S. federal net operating loss carryforwards of $446.7 million, of which $253 million are expected to expire unused under the limitations imposed by Internal Revenue Code Section 382. Of the total amount of Federal NOLs (notwithstanding the 382 limitation), $254.5 million begin to expire in 2027, while the remaining $192.2 million carry forward indefinitely. At December 31, 2023, the Company had U.S. state net operating loss carryforwards of $336.3 million, of which $199 million are expected to expire unused under the state tax law equivalents of Internal Revenue Code Section 382. Of this amount (notwithstanding the 382 limitations), $323.0 million of state NOLs begin to expire in 2024, while the remaining $13.3 million carry forward indefinitely. At December 31, 2023, the Company had federal research credit carryforwards in the amount of $11.7 million. These carryforwards begin to expire in 2027. However, under the limitations of Internal Revenue Code Section 383, it is expected that $8.8 million of this carryforward will expire unused. The utilization of the federal net operating loss carryforwards and credit carryforwards will depend on the Company’s ability to generate sufficient taxable income prior to the expiration of the carryforwards.

At December 31, 2023, the Company had foreign operating loss carryforwards in Italy of approximately $25.0 million, which can be carried forward indefinitely; foreign operating loss carryforwards in Luxembourg of approximately $95.6 million, which will begin to expire in 2034; foreign operating loss carryforwards in Switzerland of approximately $135.3 million, which begin to expire in 2024, and foreign operating loss carryforwards in Canada of approximately $1.4 million, which begin to expire in 2040.

The Company has evaluated its tax positions to consider whether it has any unrecognized tax benefits. As of December 31, 2023, the Company had gross unrecognized tax benefits of approximately $0.7 million. Of the total, none would reduce the Company’s effective tax rate if recognized. The Company does not anticipate a significant change in total unrecognized tax benefits or the Company’s effective tax rate due to the settlement of audits or the expiration of statutes of limitations within the next twelve months. Furthermore, the Company does not expect any cash settlement with the taxing authorities as a result of these unrecognized tax benefits as the Company has sufficient unutilized carryforward attributes to offset the tax impact of these adjustments.

The following is a tabular reconciliation of the Company’s change in gross unrecognized tax positions at December 31 (in thousands):

	2023		2022
	(in thousands)
Beginning balance	$	335	$	141
Gross increases for tax positions related to current periods		328		194
Gross decreases related to 382 limitations		52		-
Ending balance	$	715	$	335

The Company recognizes interest and penalties related to uncertain tax positions in the provision for income taxes. As of December 31, 2023 and 2022, the Company had no accrued interest or penalties related to uncertain tax positions.

The Company has analyzed its filing positions in all significant federal, state, and foreign jurisdictions where it is required to file income tax returns, as well as open tax years in these jurisdictions. With few exceptions, the Company is no longer subject to United States Federal, state, and local tax examinations by tax authorities for years before 2020, although carryforward attributes that were generated prior to 2020 may still be adjusted upon examination by the taxing authorities if they either have been or will be used in a future period. No income tax returns are currently under examination by taxing authorities.

Taxes computed at the then-current statutory federal income tax rate of 21% are reconciled to the provision for income taxes as follows for the years ended December 31:

	2023						2022
	Amount			Percent of Pretax Earnings			Amount			Percent of Pretax Earnings
	(in thousands)
United States federal tax at statutory rate	$	(16,405	)		21.0	%	$	(15,801	)		21.0	%
State taxes (net of deferred benefit)		(2,493	)		3.2	%		(2,912	)		3.9	%
Nondeductible expenses		755			(1.0	%)		1,077			(1.4	%)
Change in fair market value of contingent consideration		244			(0.3	%)		(283	)		0.4	%
Warrant remeasurement and financing costs		(140	)		0.2	%		-			-
Research & development		(1,898	)		2.4	%		(970	)		1.3	%
Change in unrecognized tax benefits		380			(0.5	%)		194			(0.3	%)
Foreign tax rate differential		3,176			(4.1	%)		2,676			(3.6	%)
True-up to stock compensation - cancellations		-			-			49			(0.1	%)
Change in enacted tax rates and other, net		659			(0.8	%)		(96	)		0.0
Change in valuation allowance		16,036			(20.5	%)		16,384			(21.8	%)
Income tax expense (benefit)	$	314			(0.4	%)	$	318			(0.4	%)