INCOME TAXES

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The Company accounts for income taxes in accordance with the asset and liability method prescribed in ASC 740, "Accounting for Income Taxes." The Company has adopted the provisions of ASC 740-10-25, which provides recognition criteria and a related measurement model for uncertain tax positions taken or expected to be taken in income tax returns. ASC 740-10-25 requires that a position taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than not that the position would be sustained upon examination by tax authorities. Tax positions that meet the more likely than not threshold are then measured using a probability weighted approach recognizing the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. The Company had no tax positions relating to open income tax returns that were considered to be uncertain.

The Company has experienced cumulative losses for both book and tax purposes since inception. The potential future recovery of any tax assets that the Company may be entitled to due to these accumulated losses is uncertain and any tax assets that that the Company may be entitled to have been fully reserved based on management’s current estimates. Management intends to continue maintaining a full valuation allowance on the Company’s deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. The deferred income tax benefit for the years ended December 31, 2023 and 2022 relate to the reduction in the deferred tax liability associated with the amortization of the intangible assets from the acquisitions of the DVO, Emerald and 2WR Entities.

Loss before income tax are as follows (in thousands):

	Year-ended December 31,
	2023		2022
Domestic	$	(23,999)	$	(13,862)
Foreign	$	(1,344)	$	(2,376)
Total	$	(25,343)	$	(16,238)

The income tax benefit for the years ended December 31, 2023 and 2022 are as follows (in thousands):

	Year-ended December 31,
	2023		2022
Current
Federal	$	—	$	—
State	$	(50)	$	(72)
Foreign	$	—	$	—
	$	(50)	$	(72)
Deferred
Federal	$	(44)	$	859
State	$	—	$	196
Foreign	$	—	$	—
	$	(44)	$	1,055
Total income tax benefit (expense)	$	(94)	$	983

A tax benefit in the period ending December 31, 2022 in the amount of $1,055,315 was recorded as a result of the release of part of the valuation allowance to offset deferred tax liabilities that were assumed as part of the business combination.

A reconciliation between the expected income tax provision at the federal statutory tax rate and the reported income tax provision for the periods ended are approximately as follows:

	Year-ended December 31,
	2023		2022
Statutory Federal income tax rate	21	%	21	%
State income taxes, net of federal benefit	3	%	2	%
Research and development tax credits	—	%	—	%
Change in valuation allowance	(18)	%	(14)	%
Change in Tax Rate	—	%	—	%
Permanent differences	(2)	%	(3)	%
Goodwill Impairment	(4.4)	%	—	%
Other	—	%	—	%
	—	%	6	%

The tax effects of significant items comprising the Company’s deferred taxes as of December 31, 2023 and 2022 are as follows (in thousands):

	December 31,
	2023		2022
Deferred tax assets:
Federal, state and foreign NOL carryover	$	9,532	$	5,618
Lease Liabilities	$	461	$	638
Bad Debts and Other Reserves	$	73	$	26
Fixed Assets	$	7
Investments	$	485	$	421
Share-based Compensation	$	—	$	—
Interest Expense	$	46	$	22
Other	$	194	$	89
Total deferred tax assets	$	10,798	$	6,814
Valuation Allowance	$	(9,786)	$	(5,114)
Net deferred tax assets	$	1,012	$	1,700
Deferred tax liabilities:
Goodwill	$	(66)	$	(9)
Intangible Assets	$	(539)	$	(1,010)
ROU Assets	$	(451)	$	(632)
Fixed Assets			$	(49)
Net deferred tax asset (liability)	$	(44)	$	—

At December 31, 2023, the Company had $34.2 million of Federal net operating loss which are set to expire beginning in 2037. The Internal Revenue Code contains provisions that may limit the net operating loss carryovers available to be used in any year if certain events occur, including significant changes in ownership interest.

Below is a table showing the gross net operating loss carryovers available at December 31, 2023 and their respective expiration:

	Amount		Expiry
Federal Net Operating Losses with expiration	$	1,945	2037
Federal Net Operating Losses with indefinite life	$	32,218	indefinite
Total Federal Net Operating Losses	$	34,163
Various State Net Operating Losses	$	29,080	2037-2043
Canada Net Operating Losses	$	1,997	2042
Netherlands Net Operating Losses	$	1,724	indefinite

Realization of operating loss carryforwards to offset future operating income for tax purposes are subject to various limitations including change of ownership and current year taxable income percentage limitations. The Company has no credit carryforwards for tax purposes.

The Company’s primary filing jurisdictions are the United States, Canada, and the Netherlands. Due to the Company’s net operating loss carryforwards, the Company’s income tax returns remain subject to examination by federal, foreign and most state taxing authorities for all tax years.