Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

Note 10 — Income Taxes

The income tax provision (benefit) consisted of the following:

(in thousands)	For The Years Ended
	December 31,
	2021			2020
Current – federal		-			-
Current – state		-			-
Deferred – federal		(854	)		(1,279	)
Deferred – international		(236	)		(199	)
Deferred – international		(15	)		(61	)
		(1,105	)		(1,539	)
Change in valuation allowance		1,105			1,539
Income tax provision (benefit)	$	-		$	-

For the years ended December 31, 2021 and December 31, 2020, the expected tax expense (benefit) based on the statutory rate is reconciled with the actual tax expense (benefit) as follows:

	For The Years Ended
	December 31,
	2021			2020
U.S. federal statutory rate		21.0	%		(21.0	)%
State taxes, net of federal benefit		4.9	%		(5.8	)%
Foreign rate differential		0.0	%		(0.1	)%
Permanent differences		0.1	%		(1.9	)%
Change in tax rates		0.9	%		0.3	%
Return-to-provision adjustments		(0.1	)%		0.6	%
Tax credits		0.0	%		5.2	%
Other		-			-	%
Change in valuation allowance		(26.8	)%		22.5	%
Income tax provision (benefit)		0.0	%		0.0	%

As of December 31, 2021 and December 31, 2020, the Company’s net deferred tax asset consisted of the effects of temporary differences attributable to the following:

(in thousands)	December 31,
	2021			2020
Net operating losses	$	2,336		$	3,683
Stock-based compensation		274			190
Depreciation and amortization		(110	)		(236	)
Accrued expenses and reserves		240			106
Prepaid expenses		(11	)		(23	)
Customer deposits		183			216
Tax credit		750			824
Charitable Contributions		26			37
Lease Accounting		2			(2	)
Other, net		2			2
Deferred tax asset, net		3,692			4,797
Valuation allowance		(3,692	)		(4,797	)
Deferred tax asset, net of valuation allowance		-			-

The Company has federal tax net operating loss carryforwards of approximately $8.1 million as of December 31, 2021 and state net operating loss carryforwards (each, an “NOL”) spread across various jurisdictions with a combined total of approximately $8.9 million as of December 31, 2021. The federal NOL generated prior to 2018 of $3.2 million was fully utilized in 2021. The federal NOL generated after December 31, 2018 will never expire but can only reduce 80% of taxable income in future years.  Additionally, the Company also has tax credit carryforwards of approximately $750 thousand as of December 31, 2021.  These credit carryforwards, if not used in future periods, will begin to expire in 2029.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some or all of the deferred tax assets will be realized.  The ultimate realization of deferred tax assets is dependent upon the future generation of taxable income during the periods in which those temporary differences become deductible. The Company has historically been in a loss position. However, it is in a taxable income position for federal and state tax purposes in 2021. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, past three years of cumulative financial taxable income, and taxing strategies in making this assessment.  Based on this assessment, management has maintained the position of establishing a full valuation allowance against all of the net deferred tax assets for each period, since it is more likely than not that all of the deferred tax assets will not be realized as of the balance sheet date.  The valuation allowance for the years ended December 31, 2021 decreased by approximately $1.1 million compared to the valuation allowance increase of $1.5 million from 2019 to 2020.

Management has evaluated and concluded that there were no material uncertain tax positions requiring recognition in the Company’s consolidated financial statements as of December 31, 2021 and 2020. The Company does not expect any significant changes in its unrecognized tax benefits within 12 months of the reporting date. The Company has U.S. federal and certain state tax returns subject to examination by tax authorities beginning with those filed for the year ended December 31, 2015. The Company’s policy is to classify assessments, if any, for tax related interest as interest expense and penalties as general and administrative expenses in the consolidated statements of operations.

On March 27, 2020, the United States enacted the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The Cares Act is an emergency economic stimulus package that includes spending and tax breaks to strengthen the United States economy and fund a nationwide effort to curtail the effects of COVID-19.  As a result of the CARES Act, the Company obtained a loan through the Paycheck Protection Program (“PPP”).   A portion of the PPP loan and related interest is forgiven to the extent the loan is spent on eligible expenses and other criteria are met.  During the year ended December 31, 2020, $757,782 in principal amount of this loan was forgiven which resulted in income that was not recognized for tax purposes. The balance of the PPP Loan was reduced in 2021 due to payments made towards the loan. The Company has not recorded any subsequent income or expenses related to this loan.