v3.25.1
Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]

10. Income Taxes

 

The components of the provision for income taxes are as follows (dollars in thousands):

 

   Year Ended December 31, 
   2024   2023 
Current:        
Federal  $ -   $ - 
State   21    17 
International   977    406 
Current income tax expense (benefit)   998    423 
Deferred:          
Federal   -    - 
State   -    - 
International   142    (134)
Deferred income tax expense (benefit)   142    (134)
Total income tax expense  $1,140   $289 

Taxes on income vary from the statutory federal income tax rate applied to earnings before tax on income as follows (dollars in thousands):

 

   Year Ended December 31, 
   2024   2023 
Statutory federal income tax rate of 21% applied to earnings before income taxes and extraordinary items  $(5,413)  $(11,091)
State taxes - net of federal benefit   16    14 
Meals and entertainment   -    10 
Gifts   1    4 
Stock compensation (ISOs)   74    189 
Goodwill impairment   613    - 
Changes in FV of derivative liability   (3)   (1,374)
Derecognition expense on conversion of convertible debt   126    5,257 
Foreign withholding tax   384    - 
Valuation allowance   6,076    7,223 
Others   53    212 
Foreign rate difference   (787)   (155)
Total  $1,140   $289 

 

Deferred income tax assets and liabilities arising from differences between accounting for financial statement purposes and tax purposes, less valuation reserves at year-end, are as follows (dollars in thousands):

 

   Year Ended December 31, 
   2024   2023 
State taxes - prior year  $4   $4 
Intangible assets   5,692    4,785 
Fixed assets   19    2 
Allowance for credit losses   453    1,064 
Capitalization of research and development under Sec 174   2,357    2,012 
Inventory reserve   29    24 
Impairment loss on investment   315    - 
Goodwill   755    - 
Stock compensation (RSA)   34    111 
Lease liability   899    962 
Section 163(j) limitation   685    - 
Accrued expenses   257    73 
Other   -    70 
Net operating loss carryover   31,140    26,689 
Total deferred tax assets   42,639    35,796 
           
Deferred tax liabilities:          
Goodwill   -    (161)
Intangible assets   -    (13)
Right of use assets   (844)   (987)
Other   (87)     
Total deferred tax liabilities   (931)   (1,161)
           
Net deferred tax assets, non-current prior to valuation allowance   41,708    34,635 
Valuation allowance   (41,795)   (34,579)
Total net deferred taxes  $(87)  $56 

The Company uses the liability method of accounting for income taxes as set forth in ASC 740, Income Taxes (ASC 740). Under the liability method, deferred taxes are determined based on differences between the financial statement and tax bases of assets and liabilities using enacted tax rates.

 

As of December 31, 2024, the Company had Federal and State Net Operating Loss (“NOL”) carryforwards of $119.5 million and $77.4 million, respectively. Under the new tax law, the Federal NOL arising in tax years ending after December 31, 2017 will be carried forward indefinitely. The Company does not have pre-tax reform Federal NOL carryforwards as of December 31, 2024. NOL carryforwards arising from tax years ending after December 31, 2017, are $119.5 million. The State NOL carryforwards will begin to expire in 2038.

 

As of December 31, 2024, and 2023, the Company maintained a full valuation allowance for NOL carryforward deferred tax assets. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. The amount of the deferred tax asset considered realizable, however, could be reduced if estimates of future taxable income are reduced.

 

The Company files a consolidated Federal income tax return and files tax returns in various state and local jurisdictions. The statutes of limitations for its consolidated Federal income tax returns are open for years 2021 and thereafter, and state and local income tax returns are open for years 2020 and thereafter.

 

Interest and penalties related to uncertain tax positions are recognized as a component of income tax expense. For the tax years ended December 31, 2024, and 2023, the Company recognized no interest or penalties.