Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income tax provision (benefit) is as follows for the years ended:

	DECEMBER 31,
	2020			2019
Current provision
State	$	68,541		$	10,000
Foreign		6,577			38,991
Total		75,118			48,991
Deferred provision (benefit)
Federal		(6,651,247	)		177,049
State		(823,822	)		189,632
Foreign		-			(23,022	)
Total		(7,475,069	)		343,659
Income tax (benefit) provision	$	(7,399,951	)	$	392,650

Income tax provision (benefit) effective rates, which differs from the federal and state statutory rate as follows for the years ended:

	DECEMBER 31,
	2020			2019
Statutory federal income tax rate		21.0	%		21.0	%
State, net of federal benefit		7.0	%		1.5	%
Non-deductible expenses		-0.8	%		16.5	%
Change in valuation allowance		-281.2	%		-22.1	%
Foreign rate differential		-			-1.1	%
Return to accrual difference true-ups		-1.4	%		32.8	%
Other		-1.1	%		14.7	%
Deferred tax adjustment and true-up		3.4	%		-2.8	%
Combined effective tax rate		-253.1	%		60.5	%

The tax effects of temporary differences that give rise to significant portions of the Company’s deferred tax assets (liabilities) consisted of the following:

	DECEMBER 31,
	2020			2019
Deferred tax assets:
Net operating loss carryforwards	$	9,711,726		$	10,203,094
Alternative minimum tax credit		45,650			45,650
Share-based compensation		627,980			653,679
Intangible amortization		473,882			481,192
Lease liability		1,522,560			1,365,543
Other assets		107,682			175,305
Total deferred tax assets		12,489,480			12,924,463
Less: valuation allowance		(2,152,768	)		(10,364,787	)
Total deferred tax assets, net		10,336,712			2,559,676
Deferred tax liabilities:
Goodwill amortization		2,786,029			2,532,650
Depreciation		177,170			135,470
Foreign intangible amortization		336,759			447,811
Other liabilities		12,819			12,818
Lease asset		1,417,856			1,299,489
Total deferred tax liabilities		4,730,633			4,428,238
Net deferred tax asset (liability)	$	5,606,079		$	(1,868,562	)

As of December 31, 2020, the Company had approximately $36.1 million in net operating loss (NOL) carry forwards available to offset future taxable income for federal income tax purposes, net of the potential Section 382 limitations. These federal NOL carry forwards expire between 2021 and 2036. Included in the recorded deferred tax asset, the Company had a benefit of approximately $36 million available to offset future taxable income for state income tax purposes. These state NOL carry forwards expire between 2024 and 2036. Because of the change of ownership provisions of the Tax Reform Act of 1986, use of a portion of our domestic NOL may be limited in future periods. Further, a portion of the carryforwards may expire before being applied to reduce future income tax liabilities.

Changes in the valuation allowance for the years ended were as follows:

	DECEMBER 31,
	2020			2019
Beginning balance	$	(10,364,787	)	$	(10,507,891	)
Decreases (increases)		8,212,019			143,104
Ending balance	$	(2,152,768	)	$	(10,364,787	)

The Company’s valuation allowance predominantly consisted of domestic net operating loss carryforwards and certain state net operating loss carryforwards. As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of December 31, 2020, in part because in the current year we achieved three years of cumulative pretax income in the U.S. federal tax jurisdiction, management determined that there is sufficient positive evidence to conclude that it is more likely than not that additional deferred taxes of are realizable. It therefore reduced the valuation allowance accordingly. During 2020, the Company released $8.2 million of the deferred tax asset valuation allowance to offset the regular tax expense generated by current earnings. In the future, changes in the Company’s valuation allowance may result from, among other things, additional pretax operating losses resulting in increases in our valuation allowance or pretax operating income resulting in decreases in our valuation allowance.

 The Company files U.S. federal income tax returns with the Internal Revenue Service (“IRS”) as well as income tax returns in various states and certain foreign countries. The Company may be subject to examination by the IRS for tax years 2003 and forward. The Company may be subject to examinations by various state taxing jurisdictions for tax years 2003 and forward. The Company may be subject to examination by various foreign countries for tax years 2014 forward. As of December 31, 2020, the Company is currently not under examination by the IRS, any state or foreign tax jurisdiction. The Company did not have any unrecognized tax benefits at either December 31, 2020 or 2019. In the future, any interest and penalties related to uncertain tax positions will be recognized in income tax expense.