Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income tax expense (benefit) for the years ended December 31, 2023 and 2022 attributable to loss from continuing operations is presented below.

	Current		Deferred		Total
Year ended December 31, 2023
Federal	$	(8)	$	—	$	(8)
State	12		—		12
Foreign	356		(42)		314
	$	360	$	(42)	$	318
Year ended December 31, 2022
Federal	$	404	$	—	$	404
State	(13)		—		(13)
Foreign	500		(345)		155
	$	891	$	(345)	$	546

Actual income tax expense (benefit) differs from the “expected” income tax expense (benefit) computed by applying the United States Federal statutory income tax rate of 21% for both 2023 and 2022 to loss from continuing operations before income tax expense, as follows:

	Year Ended December 31,
	2023		2022
Income tax benefit at Federal statutory income tax rate	$	(3,172)	$	(710)
Increase (decrease) in income taxes resulting from:
State income tax benefit (expense), net of federal benefit	971		(17)
State research and development, investment credits	291		265
Non-deductible meals & entertainment	13		8
Non-deductible stock compensation expense	644		133
Non-deductible compensation under 162(m)	49		7
Prior period prepaid tax	—		276
Foreign withholding taxes	—		139
Foreign tax rate differential	106		(3)
Federal research and development credits	110		(55)
Uncertain tax positions	55		(99)
Provision to tax return adjustments	104		110
Change in valuation allowance	3		530
Goodwill impairment	1,157		—
Sale of KVH Media Group Entertainment Limited	—		(206)
Other	(13)		168
Income tax expense	$	318	$	546

Loss from continuing operations before income tax expense determined by tax jurisdiction, are as follows:

	Year Ended December 31,
	2023		2022
United States	$	(9,777)	$	(4,687)
Foreign	(5,327)		1,238
Total	$	(15,104)	$	(3,449)

Deferred tax assets and liabilities for the periods presented consisted of the following:

	December 31,
	2023		2022
Deferred tax assets:
Accounts receivable, due to allowance for doubtful accounts	$	185	$	221
Inventories	1,633		1,335
Operating loss carryforwards	5,179		4,443
Stock-based compensation expense	666		881
Property and equipment, due to difference in depreciation	68		283
Research and development tax credit carryforwards	5,852		5,743
Foreign tax credit carryforwards	2,345		2,345
State tax credit carryforwards	3,378		3,710
Capitalized research and development	5,354		5,003
Warranty reserve	177		302
Accrued expenses	640		1,206
Lease liability	215		483
Gross deferred tax assets	25,692		25,955
Less valuation allowance	(21,835)		(21,711)
Total deferred tax assets	3,857		4,244
Deferred tax liabilities:
Purchased intangible assets	—		(39)
Property and equipment, due to differences in depreciation	(3,386)		(3,514)
Right of use asset	(216)		(487)
Total deferred tax liabilities	(3,602)		(4,040)
Net deferred tax asset	$	255	$	204
Deferred income tax asset	$	256	$	259
Deferred income tax liability	$	(1)	$	(55)

As of December 31, 2023 the Company has federal and state tax loss carryforwards of approximately $22,854 and $3,154, respectively. The federal loss carryforward has no expiration date. The state losses expire through the year 2043. As of December 31, 2023, the Company had federal research and development tax credit carryforwards in the amount of $5,842 and other general business credits of $9 that expire in years 2029 through 2042. As of December 31, 2023, the Company had foreign tax credit carryforwards in the amount of $2,345 that expire in years 2026 through 2027. As of December 31, 2023, the Company had state research and development tax credit carryforwards in the amount of $4,181 that expire in years 2023 through 2030. The Company also had other state tax credit carryforwards of $96 available to reduce future state tax expense that expire in years 2023 through 2030.

The Company’s ability to utilize these net operating loss carryforwards and tax credit carryforwards may be limited in the future if the Company experiences an ownership change pursuant to Internal Revenue Code Section 382. An ownership change occurs when the ownership percentages of 5% or greater stockholders change by more than 50% over a three-year period.

In assessing the realizability of its net deferred tax assets, the Company considered whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. As of December 31, 2023, the valuation decreased by $682. The change was primarily the result of the current year loss, the expiration of stock compensation deferred assets, the reduction in the state effective tax rate and the expiration of state loss carryforwards. As part of the Company’s analysis, the Company evaluated, among other factors, its recent history of generating tax losses and its near-term forecasts of future taxable income or losses.

As of December 31, 2023, unremitted foreign earnings, which were not significant, have been retained by the Company's foreign subsidiaries for indefinite reinvestment. Upon repatriation of those earnings, in the form of dividends or otherwise, the Company could be subject to state tax and withholding taxes payable to various foreign countries.

The Company establishes reserves for uncertain tax positions based on management’s assessment of exposure associated with tax deductions, permanent tax differences, and tax credits. The tax reserves are analyzed periodically and adjustments are made as events occur that warrant adjustment to the reserve. The Company's policy is to recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense.

The aggregate changes in the total gross amount of unrecognized tax benefits, excluding penalties and interest, are as follows:

	Year Ended December 31,
	2023		2022
Unrecognized tax benefits as of January 1	$	1,482	$	1,653
Gross decrease in unrecognized tax benefits - prior year tax positions	(418)		(160)
Lapse of statute of limitations	(20)		(11)
Unrecognized tax benefits as of December 31	$	1,044	$	1,482

All unrecognized tax benefits as of December 31, 2023 and 2022, if recognized, would result in a reduction of the Company's effective tax rate.

The Company recorded interest and penalties of $74 and $56 in its consolidated statement of operations for the years ended December 31, 2023 and 2022, respectively. Total accrued interest and penalties related to tax positions taken on our tax returns and included in non-current income taxes payable was approximately $366 and $311 as of December 31, 2023 and 2022, respectively.

The timing of any resolution of income tax examinations is highly uncertain, as are the amounts and timing of any settlement payment. These events could cause fluctuations in the balance sheet classification of current and non-current assets and liabilities. The Company estimates that it is reasonably possible that the balance of unrecognized tax benefits as of December 31, 2023 may decrease approximately $25 in the next twelve months as a result of a lapse of statutes of limitation and settlements with taxing authorities.

The Company’s tax jurisdictions include the United States, the United Kingdom, Denmark, Cyprus, Norway, Brazil, Singapore, Japan, and India. In general, the statute of limitations with respect to the Company's United States federal income taxes has expired for years prior to 2020, and the relevant state and foreign statutes vary. However, preceding years remain open to examination by United States federal and state and foreign taxing authorities to the extent of future utilization of net operating losses and research and development tax credits generated in each preceding year.