Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Tax Disclosure

NOTE 11 - INCOME TAXES

The components of the provision (benefit) for income taxes attributable to continuing operations for the years ended December 31, 2022 and 2021 are as follows (in thousands):

	2022		2021
Current
State	$	204	$	95
Total current	$	204	$	95
Deferred
Federal	$	187	$	292
State	(279)		415
Total deferred	$	(92)	$	707
Gross tax provision	$	112	$	802

Our provision for income taxes attributable to continuing operations for the years ended December 31, 2022 and 2021 differ from the expected tax expense (benefit) amount computed by applying the statutory federal income tax rate of 21% to income before income taxes as a result of the following:

	2022		2021
Computed at statutory rate	$	(3,013)	$	846
State tax, net of federal benefit	(1,181)		(207)
PPP loan forgiveness	—		(1,817)
Permanent items and other	(13)		34
Credit carryforwards	166		(308)
Change in tax carryforwards not benefited	14		457
Change in valuation allowance	4,139		1,797
	$	112	$	802

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred taxes for the years ended December 31, 2022 and 2021 are as follows (in thousands):

	2022		2021
Deferred tax assets
Net operating leases	$	11,462	$	11,522
Research and development credit carryforwards	3,407		3,600
Disallowed interest expense carryforwards	187		5
Stock compensation	1,011		480
Deferred revenue	9		27
Accrued expenses	1,739		984
Lease liabilities	2,163		1,637
Other	3		2
Gross deferred tax assets	19,981		18,257
Less: Valuation allowance	(12,828)		(8,689)
Total deferred tax assets	$	7,153	$	9,568
Deferred tax liabilities
Acquired intangibles	$	(1,257)	$	(4,075)
Fixed assets	(205)		(189)
Capitalized software	313		(1,835)
Deferred commissions	(1,732)		(1,218)
Right-of-use assets	(1,837)		(1,494)
Goodwill	(3,938)		(2,352)
Total deferred tax liabilities	$	(8,656)	$	(11,163)
Net deferred tax liabilities	$	(1,503)	$	(1,595)

At December 31, 2022, we had federal net operating loss carryforwards of $47,386, research and development credit carryforwards of $3,520. The net operating loss and research and development credit carryforwards will expire in varying amounts from 2023 through 2042, if not utilized. Approximately $17,853 of the net operating loss carryforwards carry forward indefinitely, but can only offset up to 80% of taxable income.

As a result of various acquisitions by us in prior years, we may be subject to a substantial annual limitation in the utilization of the net operating losses and credit carryforwards due to the “change in ownership” provisions of Section 382 of the Internal Revenue Code of 1986. The annual limitation may result in the expiration of net operating losses before utilization.

Due to the uncertainty surrounding the timing of realizing the benefits of our favorable tax attributes in future tax returns, we have placed a valuation allowance against our net deferred tax assets, exclusive of jurisdictions in which we have net deferred tax liabilities. During the year ended December 31, 2022, the valuation allowance increased by $4,139 due primarily to operations.

Under ASC 740-10, Income Taxes, we periodically review the uncertainties and judgments related to the application of complex income tax regulations to determine income tax liabilities in several jurisdictions. We use a “more likely than not” criterion for recognizing an asset for unrecognized income tax benefits or a liability for uncertain tax positions. We have determined we have the following unrecognized assets or liabilities related to uncertain tax positions as of December 31, 2022. We do not anticipate any significant changes in such uncertainties and judgments during the next twelve months. To the extent we are required to recognize interest and penalties related to unrecognized tax liabilities, this amount will be recorded as an accrued liability. The reconciliation of our unrecognized tax benefits is as follows:

Balance at December 31, 2020	$	587
Additions based on tax positions related to the current year	23
Additions for tax positions of prior years	4
Reductions for tax positions of prior years	—
Balance at December 31, 2021	614
Additions based on tax positions related to the current year	40
Additions for tax positions of prior years	—
Reductions for tax positions of prior years	(88)
Balance at December 31, 2022	$	566

As of December 31, 2022, we had $566 of unrecognized tax benefits, of which $15 would affect the effective tax rate if recognized. Our assessment of our unrecognized tax benefits is subject to change as a function of our financial statement audit.

Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense. During the twelve months ended December 31, 2022, we recognized $0 of interest and penalties in our income tax expense.

We file tax returns in the U.S. federal jurisdiction and in several state jurisdictions. We are subject to U.S. federal income tax examinations for years ending on or after December 31, 2018 and are subject to state and local income tax examinations by tax authorities for years ending on or after December 31, 2017. We are not currently under audit for any federal or state jurisdictions.