INCOME TAX

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAX

NOTE 17 – INCOME TAX

For the year ended December 31, 2023, the Company has $741 thousand of current income tax expense (US State & Local and Foreign) and $221 thousand deferred income tax benefit.

The tax effect of temporary differences that give rise to deferred tax assets and deferred tax liabilities are as follows as of December 31,

In thousands
Deferred tax assets	2023			2022
Reserves and deferred revenue	$	1,213		$	411
163(j) Limitation		3,165			2,260
Foreign deferred tax assets		356			135
Net operating loss		10,731			8,353
Total gross deferred tax assets		15,465			11,158
Less: Valuation Allowance		(14,947	)		(10,890	)
Net deferred tax assets		518			269
Deferred tax liabilities
Depreciation		(162	)		(134	)
Total deferred tax liabilities		(162	)		(134	)
Net deferred tax assets	$	356		$	135

Components of net deferred tax assets, including a valuation allowance, are as follows as of December 31:

	2023			2022
Net deferred tax assets	$	15,303		$	11,025
Valuation allowance		(14,947	)		(10,890	)
Total deferred tax assets	$	356		$	135

The valuation allowance for deferred tax assets as of December 31, 2023 and 2022 was $14.9 million and $10.9 million, respectively. In assessing the recovery of the deferred tax assets, management considers whether it is more likely than not that some portion or all the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Management has recorded a 100% valuation allowance, against its U.S. net deferred tax assets, since Management believes it is more likely than not that it will not be realized at the date of this statement. The Company will continue to monitor the potential utilization of this asset. Should factors and evidence change to aid in this assessment, a potential adjustment to the valuation allowance in future periods may occur. The Company records any penalties and interest as a component of operating expenses.

The reconciliation between statutory rate and effective rate is as follows as of December 31,:

	2023			2022
Federal statutory tax rate		21.00	%		21.00	%
State taxes		(.03	)%		(0.07	)%
Foreign income taxes		(5.79	)%		(4.45	)%
Change in valuation allowance		(6.66	)%		(16.13	)%
Return to provision adjustments		(0.00	)%		(.03	)%
Goodwill amortization		(10.31	)%		(.76	)%
Effective tax rate		(1.79	)%		(.44	)%

The Company reported no uncertain tax liability as of December 31, 2023 and expects no significant change to the uncertain tax liability over the next twelve months. The Company’s 2020, 2021, 2022, and 2023 federal and state income tax returns are open for examination by the applicable governmental authorities.

As of December 31, 2023, the Company had a net operating loss (NOL) carryforward of approximately $43.8 million. A portion of the NOL carryforward begins to expire in 2028. Under Section 382 of the Internal Revenue Code of 1986, as amended (“IRC Section 382”), a corporation that undergoes an “ownership change” is subject to limitations on its use of pre-change NOL carryforwards to offset future taxable income. Within the meaning of IRC Section 382, an “ownership change” occurs when the aggregate stock ownership of certain stockholders (generally 5% shareholders, applying certain look-through rules and aggregation rules which combine unrelated shareholders that do not individually own 5% or more of the corporation’s stock into one or more “public groups” that may be treated as 5-percent shareholder) increases by more than 50 percentage points over such stockholders’ lowest percentage ownership during the testing period (generally three years). In general, the annual use limitation equals the aggregate value of common stock at the time of the ownership change multiplied by a specified tax-exempt interest rate. The Company has not completed a study as to whether there is a 382 limitation on its NOLs that will limit or possibly eliminate the use of its NOLs in the future. Company’s Management has recorded a 100% valuation allowance on the entire NOL as it believes that it is more likely than not that the deferred tax asset associated with the NOLs will not be realized regardless of whether or not an “ownership change” has occurred.