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INCOME TAX | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
INCOME TAX | INCOME TAX Pretax income (loss) resulting from domestic and foreign operations is as follows (in thousands):
| 2024 |  | 2023
United States | $ | (19,382) |  |  | $ | (30,393) |
Foreign | (11,185) |  |  | (11,779) |
Other Foreign Jurisdictions | 323 |  |  | 4,882 |
Total pretax book loss | $ | (30,244) |  |  | $ | (37,290) |
The components of income tax (benefit) expense at December 31, 2024 and December 31, 2023, are as follows (in thousands):
| 2024 |  | 2023
Current: |  |  |
Federal | $ | (23) |  |  | $ | 855 |
State | 55 |  |  | 93 |
Foreign | 875 |  |  | 1,589 |
Total Current | $ | 907 |  |  | $ | 2,537 |
Deferred: |  |  |
Federal | $ | — |  |  | $ | 81 |
State | — |  |  | — |
Foreign | (2,816) |  |  | (752) |
Total Deferred | $ | (2,816) |  |  | $ | (671) |
Total | $ | (1,909) |  |  | $ | 1,866 |
The reconciliation of the provision for income taxes at the United States Federal statutory rate compared to the Company’s income tax expense (benefit) as reported is as follows (in thousands):
| 2024 |  | 2023
Loss before income taxes | $ | (30,244) |  |  | $ | (37,290) |
Income tax benefit computed at the statutory rate | (6,351) |  |  | (7,831) |
State income taxes-net of federal tax benefit | 35 |  |  | 74 |
Foreign tax rate differential | (474) |  |  | (273) |
Section 162(m) compensation | — |  |  | 61 |
Foreign currency adjustment | 1 |  |  | (90) |
GILTI inclusion | 404 |  |  | 693 |
Meals | 43 |  |  | 75 |
Stock compensation | 146 |  |  | 141 |
Amortization | — |  |  | 4,845 |
Other book-tax differences | 286 |  |  | (865) |
Adjustments to prior periods – temporary differences | 693 |  |  | 1,000 |
Rate changes and differentials | (750) |  |  | (53) |
Change in valuation allowance | 4,058 |  |  | 4,089 |
Income tax (benefit) expense | $ | (1,909) |  |  | $ | 1,866 |
Tax effects of temporary differences at December 31, 2024 and December 31, 2023 are as follows (in thousands):
Deferred tax assets: | 2024 |  | 2023
Fixed assets | $ | 51 |  |  | $ | 15 |
Allowance for bad debts | 1,022 |  |  | 926 |
Inventory | 408 |  |  | 432 |
R&D amortization | 1,650 |  |  | 1,172 |
Accrued expenses | 48 |  |  | — |
Deferred revenue | 5,960 |  |  | 6,143 |
Stock compensation | 108 |  |  | 291 |
Right of use liability | 327 |  |  | 501 |
Other | 97 |  |  | — |
Interest expense limitation | 8,770 |  |  | 6,051 |
Net operating loss carry-forwards | 6,736 |  |  | 6,635 |
Deferred tax assets | $ | 25,177 |  |  | $ | 22,166 |
Valuation allowance | (22,231) |  |  | (18,173) |
Deferred tax assets, net | $ | 2,946 |  |  | $ | 3,993 |
Deferred tax liabilities: | 2024 |  | 2023
Intangible assets | (2,019) |  |  | (6,671) |
Accrued expenses | (1,277) |  |  | (982) |
Prepaid expenses | (47) |  |  | (48) |
Right of use asset | (353) |  |  | (492) |
Other | (151) |  |  | (116) |
Deferred tax liabilities | $ | (3,847) |  |  | $ | (8,309) |
Deferred tax liabilities, net | $ | (901) |  |  | $ | (4,316) |
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 $20.4 million at December 31, 2024 and 2023, of which $6.1 million will expire between December 31, 2032 and December 31, 2037 and $14.4 million will carryforward indefinitely. The cumulative U.S. state net operating losses carryforward was approximately $46.6 million and $41.7 million at December 31, 2024 and 2023, respectively. The cumulative foreign net operating losses carryforward was $2.6 million and $2.1 million at December 31, 2024 and 2023, respectively. The legacy Boxlight entities are in a net deferred tax asset position in the United States, the United Kingdom, and other jurisdictions are 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. 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 the net deferred tax asset of its legacy Boxlight entities at December 31, 2024 and 2023. The change in its valuation allowance during 2024 is approximately $4.1 million. The Company completed its IRC Sec. 382 analysis during the second quarter of 2024 and determined that it underwent an ownership change. This caused a limit on the net operating losses generated before 2020. Due to the full valuation allowance on net operating loss carryovers, there is no impact to the financial statements as a result of this limitation. The Sahara entities have recorded a net deferred tax liability, which is primarily driven by the net deferred tax liability on the intangibles for which it does not have tax basis. The Company does not 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 $0.9 million at December 31, 2024 is primarily based on the Sahara acquired entities. The tax years from 2011 to 2024 remain open to examination in the U.S. federal jurisdictions. The tax years from 2023 to 2024 remain open to examination in the U.K. Statues of limitations vary in other immaterial jurisdictions. The company has not identified any material uncertain tax positions at this time. During the second quarter of 2021, the Company became aware of a potential state tax exposure for failure to file minimum tax returns in a state for several years. The Company has recorded an exposure item of $95 thousand for its best estimate of the amount for which it will settle the exposure. This amount includes $24 thousand of income tax and $71 thousand of penalties and interest. The Company has not identified any other material uncertain tax positions during the three months ended December 31, 2024. The Organization for Economic Co-operation and Development (“OECD”) introduced Base Erosion and Profit Shifting (“BEPS”) Pillar 2 rules that impose a global minimum tax rate of 15%. Numerous countries, including European Union member states, have enacted or are expected to enact legislation to be effective as early as January 1, 2024, with general implementation of a global minimum tax rate by January 1, 2025. We are currently evaluating the potential impact of the rules on our consolidated financial statements and related disclosures.

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