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Income Taxes | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | NOTE 10 – INCOME TAXES Pretax income (loss) resulting from domestic and foreign operations is as follows (in thousands):
|  | 2020 |  |  | 2019 |
United States |  | $ | (12,269 | ) |  | $ | (9,502 | )
United Kingdom |  |  | (4,683 | ) |  |  | 100 |
Other Foreign Jurisdictions |  |  | (21 | ) |  |  | - |
Total Pretax book income |  | $ | (16,973 | ) |  | $ | (9,402 | )
The components of income tax benefit at December 31, 2020 and December 31, 2019, are as follows (in thousands):
|  | 2020 |  |  | 2019 |
Current: |  |  |  |  |  |  |  |
Federal |  | $ | - |  |  | $ | - |
State |  |  | - |  |  |  | - |
Foreign |  |  | 645 |  |  |  |  |
Total Current |  | $ | 645 |  |  | $ | - |
Deferred: |  |  |  |  |  |  |  |
Federal |  | $ | - |  |  | $ | - |
State |  |  | - |  |  |  | - |
Foreign |  |  | (1,466 | ) |  |  |  |
Total Deferred |  | $ | (1,466 | ) |  | $ | - |
Total |  | $ | (821 | ) |  | $ | - |
The reconciliation of the provision for income taxes at the United States Federal statutory rate compared to the Company’s income tax expense as reported is as follows (in thousands)
|  | 2020 |  |  | 2019 |
Income (Loss) before income taxes |  |  |  |  |  |  |  |
Income tax benefit computed at the statutory rate |  | $ | (3,565 | ) |  | $ | (1,975 | )
Foreign tax rate differential |  |  | 99 |  |  |  | - |
Loss on debt settlement |  |  | 650 |  |  |  | - |
Non-deductible expenses |  |  | 212 |  |  |  | 386 |
Other book-tax differences |  |  | - |  |  |  | (1 | )
Prior period true ups – temporary differences |  |  | 525 |  |  |  | - |
Rate changes and differentials |  |  | 61 |  |  |  | (23 | )
Change in valuation allowance |  |  | 1,197 |  |  |  | 1,613 |
|  | $ | (821 | ) |  | $ | - |
Tax effects of temporary differences at December 31, 2020 and December 31, 2019 are as follows (in thousands):
Deferred tax assets: |  | 2020 |  |  | 2019 |
Fixed assets |  | $ | 62 |  |  | $ | 14 |
Allowance for bad debts |  |  | 281 |  |  |  | 197 |
Inventory |  |  | 82 |  |  |  | 59 |
Accrued expenses |  |  | - |  |  |  | 54 |
Deferred revenue |  |  | 2,190 |  |  |  | - |
Stock compensation |  |  | 300 |  |  |  | - |
Others |  |  | 127 |  |  |  | 17 |
Interest Expense Limitation |  |  | 955 |  |  |  | 640 |
Net operating loss carry-forwards |  |  | 7,361 |  |  |  | 5,646 |
Deferred tax assets (liabilities) |  | $ | 11,358 |  |  | $ | 6,627 |
Valuation allowance |  |  | (7,959 | ) |  |  | (6,627 | )
Deferred tax assets |  | $ | 3,399 |  |  | $ | - |
Net deferred tax assets |  | $ | 3,399 |  |  | $ | - |
Deferred tax liabilities: |  | 2020 |  |  | 2019 |
Intangible assets |  | $ | (10,759 | ) |  | $ | - |
Accrued expenses |  |  | (404 | ) |  |  | - |
Prepaid expenses |  |  | (139 | ) |  |  | - |
Deferred tax liabilities |  | $ | (11,302 | ) |  | $ | - |
Net deferred tax liabilities |  | $ | (7,903 | ) |  | $ | - |
The Company operates in the United States, United Kingdom and other jurisdictions. Income taxes have been provided based upon the tax laws and rates of the countries in which operations are conducted and income is earned. The cumulative U.S. Federal net operating losses carryforward on tax basis income was approximately $26.5 million and $19.6 million at December 31, 2020 and 2019, respectively, of which $10.6 million will expire between 2029 and 2037 and $15.8 million will carryforward indefinitely. The cumulative U.S. state net operating losses carryforward was approximately $23.0 million and $19.8 million on December 31, 2020 and 2019, respectively. The cumulative foreign net operating losses carryforward was $2.9 million and $2.7 million on December 31, 2020 and 2019, respectively. Prior to the Sahara acquisition, the Company had a net deferred tax asset position in the United States, the United Kingdom, and other jurisdictions, primarily driven by the aforementioned net operating losses. The recoverability of these deferred tax assets depends on the Company’s ability to generate taxable income in the jurisdiction to which the carryforward applies. It also depends on specific tax provisions in each jurisdiction that could impact utilization. For example, in the United States, a change in ownership, as defined by federal income tax regulations, could significantly limit the Company’s ability to utilize our U.S. net operating loss carryforwards. Additionally, because U.S. tax laws limit the time during which the net operating losses generated prior to 2018 may be applied against future taxes, if the Company fails to generate U.S. taxable income prior to the expiration dates, the Company may not be able to fully utilize the net operating loss carryforwards to reduce future income taxes. The Company has evaluated both positive and negative evidence as to the ability of its legacy entities in each jurisdiction to generate future taxable income. Based on its long history of cumulative losses in those jurisdictions, it believes it is appropriate to maintain a full valuation allowance on its net deferred tax asset at December 31, 2020 and 2019. The change in its valuation allowance during 2020 is approximately $1.2 million. Due to the Sahara acquisition, the Company has recognized a net deferred tax liability for the acquired entities, primarily driven by acquired intangible assets for which it does not have tax basis in the jurisdictions in which operates (primarily the United Kingdom, the Netherlands, and the United States). The Company does not expect to qualify for any consolidated filing positions in any of these countries, so there is no ability to net the deferred tax liabilities of the Sahara companies against the deferred tax assets of the legacy Boxlight companies. Therefore, the net deferred tax liability of $7.9 million at December 31, 2020 is entirely based on the Sahara acquired entities. The tax years from 2016 to 2020 remain open to examination by the major taxing jurisdictions to which the Company is subject. The Company has not identified any uncertain tax positions at this time. On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was enacted. The CARES Act includes provisions, among others, addressing the carryback of net operating losses for specific periods, refunds of alternative minimum tax credits, temporary modifications to the limitations placed on the tax deductibility of net interest expenses, and technical amendments for qualified improvement property. Additionally, the CARES Act provides for various payroll incentives, including Payroll Protection Program (“PPP”) loans, refundable employee retention tax credits, and the deferral of the employer-paid portion of social security payroll taxes. The Company received a $1.1M loan under the PPP, of which over $0.8M is expected to be forgiven under the requirements of the program. Any unforgiven portion will be paid back under the terms of the loan. No other provisions of the CARES Act had a material impact on the Company’s tax provision. On December 27, 2020, the Consolidated Appropriations Act of 2021 - including the COVID-related Tax Relief Act of 2020 - was enacted. It included a provision that any expenses paid using forgiven PPP loan proceeds would be fully deductible. This has been reflected in the Company’s tax provision. In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (ASC 740): Simplifying the Accounting for Income Taxes. The standard eliminates the need for an organization to analyze whether the following apply in a given period: (1) the exception to the incremental approach for intraperiod tax allocation; (2) the exceptions to accounting for basis differences when there are ownership changes in foreign investments; and (3) the exception in interim periods income tax accounting for year-to-date losses that exceed anticipated losses. The ASU also is designed to improve financial statement preparers’ application of income tax-related guidance and simplify GAAP for (1) franchise taxes that are partially based on income, (2) transactions with a government that result in a step-up in the tax basis of goodwill, (3) separate financial statements of legal entities that are not subject to tax, (4) enacted changes in tax laws in interim periods and (5) certain income tax accounting for employee stock ownership plans and affordable housing projects. The standard became effective for the Company on January 1, 2021. The Company does not expect adoption to have a material impact on its financial statements. On December 27, 2020, the Consolidated Appropriations Act of 2021 - including the COVID-related Tax Relief Act of 2020 - was enacted. It included a provision that any expenses paid using forgiven PPP loan proceeds would be fully deductible. This has been reflected in the Company’s tax provision.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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