INCOME TAXES

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 6 – INCOME TAXES

The reconciliation of income tax expense computed at the U.S. federal statutory rate to the income tax provision for the years ended December 31, 2023, and 2022 is as follows (in thousands):

	Year Ended December 31,
US	2023			2022
Loss before income taxes
Domestic	$	(2,612	)	$	(14,400	)
Foreign		(777	)		-
Total loss before income taxes		(3,389	)		(14,400	)
Taxes under statutory US tax rates		(712	)		(3,024	)
Increase (decrease) in taxes resulting from:
Foreign taxes and rate differential		(53	)		-
Increase (decrease) in valuation allowance		642			(1,188	)
Change in State tax rate		(25	)		(57	)
Prior period true up		267			5,045
State taxes		(119	)		(776	)
Income tax expense	$	-		$	-

The increase in the valuation allowance during the year ended December 31, 2023 was due primarily to the increase in our net operating losses which may not be utilized in the future. The decrease in the Company's net valuation allowance in the year ended December 31, 2022 was due primarily to a realized loss in our equity investment (See Note 2-Equity Investments), and to net operating losses which will expire unutilized due to limitations resulting from application of Section 382 of the Internal Revenue Code of 1986, as amended (“IRC”).

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities consist of the following (in thousands):

	December 31,
	2023			2022
US
Net operating loss carryforwards	$	6,318		$	6,495
Restricted stock (RSA’s, RSU’s)		613			503
Stock options		527			562
Stock Purchase Plan (SPP)		2			8
Depreciation		(45	)		(71	)
Intangibles		(27	)		22
Acquisition transaction costs		172			110
Capitalized research and development		(1	)		17
Unrealized gain on investment		2			(1	)
Bad debt		42			9
Capital loss carryforward		680
Accruals & other		11
Dividend income					(2	)
Gross deferred tax assets	$	8,294		$	7,652
Less valuation allowance		(8,294	)		(7,652	)
Total deferred tax assets	$	-		$	-
Deferred tax liabilities:
Total deferred tax liabilities		-			-
Net deferred tax assets / (liabilities)	$	-		$	-

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 may not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences are deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based upon these factors, Management has placed a full valuation allowance against all deferred tax assets, including net operating loss carryforwards, due to the uncertainty of future profitability.

As of December 31, 2023, the Company has net operating loss carryforwards of $22.7 million for tax purposes, which will be available to offset future taxable income. If not used, $7.5 million of these carryforwards will expire beginning in 2024, and $15.2 million will carryforward indefinitely. As of the year ended December 31, 2022, Federal and state NOLs of $23.1 million and $0, respectively, will expire unutilized due to the limitations of Section 382, leaving Federal and state NOL carryforwards of $24.4 million and $13.1 million, respectively.

The Company completed the IRC Section 382 analysis, in 2022, and determined that an ownership change occurred sufficient to impose additional limitations on the use of NOL carryforwards. The Company has not completed the IRC Section 382 analysis in 2023 and is not aware of any indicators that may impose additional limitations on the use of NOL carryforwards.

Utilization of the net operating losses (NOL) carryforwards may be subject to a substantial annual limitation as required by Section 382 of the IRC, due to ownership change of the company that could occur in the future, as well as similar state provisions. In general, an “ownership change” as defined by Section 382 results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders. These ownership changes may limit the amount of NOL carryforwards that can be utilized annually to offset future taxable income.

No tax benefit has been reported in the December 31, 2023, due to the uncertainty surrounding the realizability of the benefit.

Uncertain Tax Positions

As of December 31, 2023, and 2022 we had no uncertain tax positions reflected on our balance sheet. The Company files income tax returns in U.S. federal, state and local jurisdictions, and in one non-U.S. jurisdiction, and is subject to audit by tax authorities in those jurisdictions. The Company’s tax years from 2004 are subject to examination by the United States and state taxing authorities due to the carryforward of unutilized NOLs.

The Tax Cuts and Jobs Act of 2017 imposes a mandatory repatriation tax on certain unremitted foreign earnings and provides a 100% deduction to domestic corporations for certain dividends received from foreign corporations after Dec. 31, 2017. Therefore, we do not expect future dividends, if any, from the earnings of our foreign subsidiary to result in U.S. federal income taxes. Deferred tax liabilities arising from the difference between the financial reporting and income tax bases inherent in our foreign subsidiary, referred to as outside basis differences, have not been provided for U.S. income tax purposes because we do not intend to sell, liquidate or otherwise trigger the recognition of U.S. taxable income with regard to our investment in this foreign subsidiary. Determining the amount of U.S. deferred tax liabilities associated with outside basis differences is not practicable at this time. 

In accordance with FASB ASC 740 “Income Taxes”, valuation allowances are provided against deferred tax assets, if based on the weight of available evidence, some or all of the deferred tax assets may or will not be realized. The Company has evaluated its ability to realize some or all of the deferred tax assets on its balance sheet and has established a valuation allowance of approximately $8.3 million at December 31, 2023. The Company did not utilize any NOL deductions for the year ended December 31, 2023.

The Company applied the "more-likely-than-not" recognition threshold to all tax positions taken or expected to be taken in a tax return, which resulted in no unrecognized tax benefits as of December 31, 2023, and December 31, 2022, respectively.

The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest and penalties on the balance sheets and recognized $2 thousand in interest and/or penalties in the Statements of Operations for the year ended December 31, 2023, and $0 in the fiscal year ended December 31, 2022.

There are no taxes payable as of December 31, 2023, or December 31, 2022.