Income Taxes

12 Months Ended

Dec. 31, 2023

Disclosure Text Block [Abstract]

Income Taxes

Note 19. Income Taxes

The following is a geographical breakdown of income/loss before the provision for income tax, for the years ended December 31, 2023 and 2022 (in thousands)

	Year Ended
	December 31, 2023			December 31, 2022
United States	$	(15,790	)	$	(19,150	)
International		759			609
Total	$	(15,031	)	$	(18,541	)

Deferred income taxes reflect the net tax effects or (a) temporary differences between the carrying amounts or assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating losses and tax credit carryforwards.

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

	Year Ended
Deferred tax assets:	December 31, 2023			December 31, 2022
Accrued compensation	$	123		$	247
Allowance for doubtful accounts		1			1
Inventory adjustments		1,645			1,654
Unrealized gains/losses		233			233
Other carryforwards		319			317
Net operating loss carryforward		8,333			6,542
Lease liability		454			668
Stock option expense		795			670
Other accrued expenses		569			276
Fixed assets		75			17
Total deferred tax assets	$	12,547		$	10,625
Deferred tax liabilities:
ROU assets	$	(434	)	$	(628	)
Intangible assets		(7	)		(467	)
Other		(25	)		—
Total deferred tax liabilities	$	(466	)	$	(1,095	)
Valuation allowance	$	12,081		$	9,530
Net deferred taxes	$	—		$	—

The federal and state income tax provision (benefit) is summarized as follows (in thousands):

	Year Ended
	December 31, 2023		December 31, 2022
Current
Federal	$	42	$	(191	)
State		15		(27	)
International		187		95
Total current tax expense		244		(123	)
Total tax (benefit) expense	$	244	$	(123	)

ASC 740 requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the Company's ability to generate sufficient taxable income within the carryforward period. Because of the Company's recent history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a valuation allowance. The valuation allowance increased by $2.5 million and $6.8 million for the year ended December 31, 2023 and 2022, respectively.

Net operating losses and tax credit carryforwards as of December 31, 2023 are as follows (In thousands):

	Amount		Expiration
			Years
Net operating losses, federal (post December 31, 2017)	$	21,452	Do not expire
Net operating losses, federal (pre January 1, 2018)		2,662	2024 to 2037
Net operating losses, state		30,603	2031 to 2043
Tax credits federal		46	2040
Tax credits, state		318	Do not expire
Net operating losses, foreign		10,147	Do not expire

The effective tax rate of the company’s provision (benefit) for income taxes differs from the federal statutory rate as follows:

	Year Ended
	December 31, 2023			December 31, 2022
Statutory rate		21.00	%		21.00	%
State tax		4.49	%		2.83	%
Permanent differences		(0.16	)%		(0.07	)%
Changes in valuation allowance		(12.90	)%		(9.82	)%
Global intangible low-taxed income (GILTI)		(5.77	)%		(1.77	)%
change in foreign tax rate		—	%		0.30	%
Foreign tax rate differential		0.24	%		0.04	%
Prior period and other adjustments		(0.87	)%		1.28	%
Impairment of goodwill		(4.43	)%		(11.84	)%
Non-deductible interest/Gain on revaluation of note		(2.96	)%		(1.28	)%
Failure to file penalties		(0.20	)%
Total		(1.56	)%		0.67	%

In January 2018, the FASB released guidance on the accounting for tax on the global intangible low-taxed income (“GILTI”) provisions of the Tax Act. The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. The Company elected to treat any potential GILTI inclusions as a period cost.

A reconciliation of the financial statement recognition and measurement of uncertain tax positions during the current year is as follows:

	Total
Balance as of December 31, 2022	$	—
Additions based on tax positions related to the current year		—
Additions for tax positions of prior years		30,000
Reductions for tax positions related to the current year		—
Reductions for tax positions of prior years		—
Balance as of December 31, 2023	$	30,000

The company recognizes interest and penalties related to uncertain tax positions in income tax expense. During the year ended December 31, 2023 and December 31, 2022, the Company recognized $30,000 and nil in interest and penalties, respectfully. As of December 31, 2023 and December 31, 2022, accrued interest and penalties to uncertain tax positions were $30,000 and nil, respectfully.

The Company is subject to tax in the U.S., U.K. and Israel and is subject to audit by tax authorities in the U.S., U.K. and Israel for which returns are subject to examination for various years dependent on the jurisdiction.