11.

Income taxes

The Company is subject to federal and state income taxes in the United States. For the years ended

December 31, 2019

and

2018

, the expense for income taxes on loss (income) from continuing operations consisted of the following:

	Year Ended December 31
(In thousands)	2019			2018
Current:
Federal	$	—		$	—
State		—			—
Foreign		39			—
Total current		39			—
Deferred:
Federal		439			3,726
State		(20	)		81
Foreign		(18	)
Less: valuation allowance		(366	)		(3,761	)
Total deferred		35			46
Income tax expense	$	74		$	46

For the years ended

December 31, 2019

and

2018

, reconciliation of the Company's effective income tax rate to the U.S. corporate statutory income tax rate is as follows:

	Year Ended December 31,
(In thousands)	2019					2018
Income tax expense at federal statutory rate	$	(351	)	21.0	%	$	680		21.0	%
Share-based compensation shortfall (windfall)		(425	)	25.4			7,080		218.7
Effect of state taxes, net of federal tax benefit		(16	)	1.0			64		2.0
Non-deductible items		934		(55.8	)		585		18.1
Return to provision adjustment		224		(13.4	)		(4	)	(0.1	)
Foreign rate difference		3		—			—		—
Other		71		(4.2	)		27		0.8
Change in valuation allowance		(366	)	21.9			(8,386	)	(259.0	)
Income tax expense	$	74		(4.4	)%	$	46		1.4	%

As of

December 31, 2019

and

2018

, the components of deferred tax assets and liabilities consist of the following:

(In thousands)	December 31, 2019			December 31, 2018
Deferred tax assets:
Net operating loss carryforwards	$	5,073		$	8,908
Share-based compensation		6,322			5,753
Interest expense limitation		1,951			2,171
Accounts receivable, net		504			451
Accrued expenses and other current liabilities		—			74
Property and equipment, net		—			73
Acquisition costs		229			—
Operating lease liability		2,910
Other		216			145
		17,205			17,575
Valuation allowance		(4,872	)		(5,238	)
		12,333			12,337
Deferred tax liabilities:
Intangible assets		(9,767	)		(12,383	)
Operating lease right-of-use asset		(2,532	)
Deferred revenue		(4	)		—
Property and equipment, net		(111	)		—
		(12,414	)		(12,383	)
Net deferred tax liability	$	(81	)	$	(46	)

As of

December 31, 2019

, the Company has federal net operating losses of

$21,661

, of which

$12,054

begin to expire in

2035

, and

$9,607

which can be carried forward indefinitely. As of

December 31, 2019

, the Company has state net operating loss carryforwards of

$31,170

, which begin to expire in

2035

. Certain net operating losses generated by the Company in

2014

and

2015

are subject to annual limitation under IRC Section

382

due to ownership changes.

For the year ended

December 31, 2018,

the Spin-off of Red Violet contributed to a

1,500

decrease to the net deferred tax assets of the Company, which was fully offset by a corresponding reduction to the valuation allowance. The aforementioned decrease represents the net deferred tax assets attributable to Red Violet on the date of the Spin-off.

As of

December 31, 2019

and

2018

, the Company recorded a full valuation allowance against its net deferred tax assets of

$4,872

and

$5,238

, respectively. For the year ended

December 31, 2019

, the decrease in the valuation allowance is primarily a result of the movement in the net deferred tax asset in the current year. The Company intends to continue maintaining a full valuation allowance on these net deferred tax assets until there is sufficient evidence to support the release of all or some portion of these allowances. Release of some or all of the valuation allowance would result in the recognition of certain deferred tax assets and an increase in deferred tax benefit for any period in which such a release

may

be recorded, however, the exact timing and amount of any valuation allowance release are subject to change, depending upon the level of profitability that the Company is able to achieve and the net deferred tax assets available.

The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. The Company files tax returns in federal and certain state and local jurisdictions. The

2015

tax year is the earliest tax year that remains subject to examination by the following taxing authorities in major jurisdictions: Federal, California, New York and New York City. Since inception, the Company has generated net operating losses, and thus the

2014

tax year remains open to examination by taxing authorities to the extent the net operating losses generated in such year are utilized in subsequent periods with open statutes.

For the years ended

December 31, 2019

and

2018

, reconciliation of the gross amounts of unrecognized tax benefits, excluding accrued interest and penalties, consists of the following:

	Year Ended December 31,
(In thousands)	2019		2018
Unrecognized tax benefits, opening balance	$	1,480	$	1,134
Increase in unrecognized tax benefits		—		346
Unrecognized tax benefits, ending balance	$	1,480	$	1,480

The unrecognized tax benefits, if recognized, would result in an increase to net operating losses that would be subject to a valuation allowance and, accordingly, result in

impact to the Company’s annual effective tax rate. As of

December 31, 2019

, the Company has

not

accrued any interest or penalties with respect to its uncertain tax positions.

The Company does

not

anticipate a significant increase or reduction in unrecognized tax benefits within the next

twelve

months.