Income Taxes

6 Months Ended

Jun. 30, 2024

Income Tax Disclosure [Abstract]

Income Taxes

14.    Income Taxes

The tax effects of temporary differences that give rise to deferred tax assets and liabilities as of June 30, 2024 and December 31, 2023 are presented below:

	As of
	June 30, 2024	December 31, 2023
	$’000	$’000
Deferred tax assets:
Net operating loss carryforwards	12,953	11,890
Receivable allowance	83	37
Stock-based compensation	78	20
Intangible assets	661	727
163(j) adjustment	361	100
Property and equipment	8	—
Accrued expenses	84	106
Capitalized costs	8	4
Deferred revenues	177	310
Leases	190	301
Gross deferred tax asset	14,603	13,495
Deferred tax liabilities:
Property and equipment	—	(60)
Leases	(178)	(274)
Unrealized gains	(1,698)	(317)
Gross deferred tax liabilities	(1,876)	(651)
Net deferred tax assets	12,727	12,844
Valuation allowance	(12,727)	(12,844)
Net deferred tax asset, net of valuation allowance	—	—

The income tax expense for the periods shown consist of the following:

	Six Months Ended June 30,
	2024	2023
	$’000	$’000
Federal:
Current	—	—
Deferred	—	—
State and local:
Current	(7)	(6)
Deferred	—	—
	(7)	(6)
Change in valuation allowance	—	—
Income tax expense	(7)	(6)

A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the periods shown, are as follows:

	As of
	June 30, 2024		December 31, 2023
Federal income tax benefit at statutory rate	21.0	%	21.0	%
State income tax benefit, net of federal impact	0.1	%	1.1	%
Permanent differences	0.5	%	(0.3)	%
Return to provision adjustments	—	%	0.5	%
Warrant modification expense	—	%	(2.5)	%
Fair value gain/loss on share issuance	(17.1)	%	3.6	%
Other	1.4	%	—	%
Change in valuation allowance	(5.6)	%	(23.2)	%
Effective income tax rate	0.3	%	0.2	%

The Company has filing obligations in what it considers its U.S. major tax jurisdictions as follows: Connecticut, Kansas, Florida, Texas, Virginia, New York State and New York City. The earliest year that the Company is subject to examination is the year ended December 31, 2015.

The Company has approximately $56.0 million of Federal and State Net operating loss (“NOLs”) available to offset future taxable income. The net operating loss carryforwards generated prior to 2018, if not utilized, will expire from 2035 to 2037 for federal and state purposes.

As of June 30, 2024 and December 31, 2023, the Company has determined that it is more likely than not that the Company will not recognize the future tax benefit of the loss carryforwards and has recognized a valuation allowance of $12.7 million and $12.8 million, respectively. The valuation allowance decreased by approximately $0.1 million.

Utilization of the net operating loss carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by Section 382 and Section 383 of the Internal Revenue Code of 1986, as amended, and similar state provisions. Generally, in addition to certain entity reorganizations, the limitation applies when one or more “5 percent stockholders” increase their ownership, in the aggregate, by more than 50 percentage points over a 36-month time period or beginning the day after the most recent ownership change, if shorter.