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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The domestic and foreign components of loss from continuing operations before income taxes for the years ended December 31, 2023 and 2022 are as follows (in thousands):
For the Years Ended December 31,
20232022
Domestic$(30,679)$(13,797)
Foreign(3,647)(6,066)
Net Loss, before tax$(34,326)$(19,863)
The income tax provision (benefit) for the years ended December 31, 2023 and 2022 consists of the following (in thousands):
For the Years Ended December 31,
20232022
Foreign
Current$— $— 
Deferred(1,168)(1,456)
U.S. federal
Current— (268)
Deferred(4,544)(2,123)
State and local
Current24 86 
Deferred(254)(123)
(5,942)(3,884)
Change in valuation allowance5,966 3,703 
Income Tax Provision (Benefit)$24 $(181)
The reconciliation between the U.S. statutory federal income tax rate and the Company’s effective rate for the years ended December 31, 2023 and 2022 is as follows:
For the Years Ended December 31,
20232022
U.S. federal statutory rate21.0 %21.0 %
State income taxes, net of federal benefit0.6 %0.5 %
Incentive stock options(0.1)%(0.2)%
162(m) Compensation Limit(1.6)%— %
US-Foreign income tax rate difference0.8 %1.6 %
Other permanent items(2.3)%(1.6)%
Provision to return adjustments0.2 %1.9 %
Deferred only adjustment(1.3)%(3.7)%
Change in valuation allowance(17.4)%(18.6)%
Effective Rate(0.1)%0.9 %
As of December 31, 2023 and 2022, the Company’s deferred tax assets consisted of the effects of temporary differences attributable to the following:
As of December 31,
(in 000s)20232022
Deferred Tax Asset
Net operating loss carryovers$31,085 $26,052 
Stock based compensation1,350 1,259 
Research credits— — 
Accrued compensation24 22 
Reserves263 279 
Intangibles1,750 1,980 
Fixed assets109 149 
Unrealized gain— — 
Capital Research332 106 
Other2,210 360 
Total Deferred Tax Asset37,123 30,207 
Less: valuation allowance(36,096)(29,205)
Deferred Tax Asset, Net of Valuation Allowance$1,027 $1,002 
As of December 31,
Deferred Tax Liabilities20232022
Intangible assets$(532)$(715)
Fixed assets(99)(160)
Other(396)(127)
Capitalized research— — 
Total deferred tax liabilities(1,027)(1,002)
Net Deferred Tax Asset (Liability)$— $— 

At December 31, 2023, the Company did not have any undistributed earnings of our foreign subsidiaries. As a result, no additional income or withholding taxes have been provided for. The Company does not anticipate any impacts of the global intangible low taxed income (“GILTI”) and base erosion anti-abuse tax (“BEAT) and as such, the Company has not recorded any impact associated with either GILTI or BEAT.

In accordance with Section 382 of the Internal Revenue Code, deductibility of the Company’s NOL carryover is subject to an annual limitation in the event of a change of control, as defined by the regulations. The Company performed an analysis to determine the annual limitation as a result of the changes in ownership that occurred during 2022 and 2023. A change in ownership occurred on March 2022, April 2023, and July 2023. The NOL available to offset future taxable income after the 2023 ownership change and divestiture of CXApp is approximately $62.4 million. The NOL generated in 2017 of $1.5 million, will expire in December 31, 2037 if not utilized. The remaining NOLs generated after 2017 have an indefinite life and do not expire.

As of December 31, 2023 all Inpixon Canada NOLs were unavailable to the Company due to the CXApp divestiture. As of December 31, 2022, Inpixon Canada, which was acquired on April 18, 2014 as a part of the AirPatrol Merger Agreement, had approximately $24.6 million of Canadian NOL carryovers available to offset future taxable income. Those NOLs, if not for the divestiture, would have begun expiring in the year 2023.
As of December 31, 2023 and 2022, Nanotron GmbH, which was acquired on October 5, 2020, had approximately $49.4 million and $44.1 million, respectively, of German NOL carryovers available to offset future taxable income. Although these NOLs do not expire, minimum taxation restrictions apply such that only a percentage of taxable income may be offset by NOL carryovers. All of these NOLs are available to the Company as a part of the continuing activity.

As of December 31, 2023 and 2022 Intranav GmbH, which was acquired on December 8, 2021, had approximately $10.6 million and $8.7 million, respectively, of German NOL carryovers available to offset future taxable income. Although these NOLs do not expire, minimum taxation restrictions apply such that only a percentage of taxable income may be offset by NOL carryovers. All of these NOLs are available to the Company as a part of the continuing activity.

As of December 31, 2023 and 2022, Active Mind Technology LTD, which was acquired on April 9, 2021 as part of the acquisition of Game Your Game Inc., had approximately $12.8 million and $11.8 million, respectively, of Irish NOL carryovers available to offset future taxable income. These NOLs have an indefinite life and do not expire. As a result of the Grafiti LLC divestiture, there are no future NOLs available to the Company as a part of the continuing activity.

As of December 31, 2023 all Inpixon Philippines, Inc’s NOLs were unavailable to the Company due to the CXApp divestiture. As of December 31, 2022 Inpixon Philippines, which was organized on April 12, 2022, had approximately $0.1 million of Philippine NOL carryovers available to offset future taxable income. Those NOLs, if not for the divestiture, would have begun expiring in the year 2026.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. In assessing the realization of deferred tax assets, management considers, whether it is “more likely than not”, that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible.

ASC 740, “Income Taxes” requires that a valuation allowance be established when it is “more likely than not” that all, or a portion of, deferred tax assets will not be realized. A review of all available positive and negative evidence needs to be considered, including the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. After consideration of all the information available, management believes that uncertainty exists with respect to future realization of its deferred tax assets with respect to Inpixon, Nanotron GmbH, Intranav GmbH, Inpixon Holding (UK) Limited and has, therefore, established a full valuation allowance as of December 31, 2023 and 2022. As of December 31, 2023 and 2022, the change in valuation allowance for continuing activity was $6.0 million and $3.7 million, respectively.

ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company is required to file income tax returns in the United States (federal), Canada, India, Germany, United Kingdom, Ireland, Philippines and in various state jurisdictions in the United States. These filings include discontinued activity periods. In the future, the Company will only be required to file tax returns in United States (federal), Germany, United Kingdom, and in various state jurisdictions in the United States. Based on the Company’s evaluation, it has been concluded that there are no material uncertain tax positions requiring recognition in the Company’s consolidated financial statements for the continuing activity in years ended December 31, 2023 and 2022.

The Company’s policy for recording interest and penalties associated with unrecognized tax benefits is to record such interest and penalties as interest expense and as a component of income tax expense. There were no amounts accrued for interest or penalties for the years ended December 31, 2023 and 2022. Management does not expect any material changes in its unrecognized tax benefits in the next year.

The Company operates in multiple tax jurisdictions and, in the normal course of business, its tax returns are subject to examination by various taxing authorities. Such examinations may result in future assessments by these taxing authorities. The Company is subject to examination by U.S. tax authorities beginning with the year ended December 31, 2020. In general, the Canadian Revenue Authority may reassess taxes four years from the date the original notice of assessment was issued. The tax years that remain open and subject to Canadian reassessment are 2019 – 2023. The tax years that remain open and subject to India reassessment are tax years beginning March 31, 2021. The German tax authorities may reassess taxes generally four years from the end of the calendar year in which the return is filed. The tax years that remain open and subject to German reassessment are 2019 – 2023. In Ireland, assessments must generally be made within four years when returns are filed. The
tax years that remain open and subject to Irish reassessment are 2019 – 2023. In general, Philippine Tax Commissioner may reassess taxes three years from the date the original notice of assessment was issued. The tax years that remain open and subject to Philippine reassessment are 2022 and 2023.
On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (“IRS 2022”). The IRA 2022, among other tax provisions, imposes a 15 percent corporate alternative minimum tax on corporations with book financial statement income in excess of $1.0 billion, effective for tax years beginning after December 31, 2022. The IRA 2022 also established a one percent excise tax on stock repurchases made by publicly traded U.S. corporations, effective for stock repurchases in excess of an annual limit of $1.0 million after December 31, 2022. The IRA 2022 did not impact the Company’s current year tax provision or the Company’s consolidated financial statements.