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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Components of the income tax expense (benefit) are as follows (in thousands):
| Years ended December 31,
| 2023 |  | 2022 |  |
Current: |  |  |  |  |
Federal | $ | — |  |  | $ | 101 |  |  |
State | 45 |  |  | 2 |  |  |
Foreign | — |  |  | — |  |  |
Total current expense | 45 |  |  | 103 |  |  |
Deferred: |  |  |  |  |
Federal | — |  |  | — |  |  |
State | 104 |  |  | (125) |  |  |
Foreign | — |  |  | — |  |  |
Total deferred expense (benefit) | 104 |  |  | (125) |  |  |
Income tax expense (benefit) | $ | 149 |  |  | $ | (22) |  |  |
The components of income (loss) before income taxes are as follows (in thousands):
| Years ended December 31,
| 2023 |  | 2022 |  |
United States | $ | 25,315 |  |  | $ | (42,242) |  |  |
Foreign | (453) |  |  | (85) |  |  |
Income (loss) before income taxes | $ | 24,862 |  |  | $ | (42,327) |  |  |
The income tax expense (benefit) differed from the amounts computed by applying the U.S. federal income tax rate of 21% respectively, to income (loss) before income tax for the reasons set forth below:
|  |  | Years ended December 31,
|  |  |  |  | 2023 |  | 2022
U.S. federal statutory tax rate |  |  |  |  | 21.0 | % |  | 21.0 | %
State income taxes, net of federal benefit |  |  |  |  | 0.5 |  |  | 0.2 |
Non-U.S. income taxed at different rates |  |  |  |  | 0.3 |  |  | (0.1) |
Tax benefit related to stock-based awards |  |  |  |  | 0.7 |  |  | (0.4) |
Change in valuation allowance |  |  |  |  | (20.9) |  |  | (21.8) |
Permanent differences related to CARES Act |  |  |  |  | (3.6) |  |  | — |
Other |  |  |  |  | 2.6 |  |  | 1.2 |
Effective income tax rate |  |  |  |  | 0.6 | % |  | 0.1 | %
Deferred income taxes reflect the tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the value reported for income tax purposes, at the enacted tax rates expected to be in effect when the differences reverse. The component of deferred tax assets and liabilities are as follows (in thousands):
| December 31,
| 2023 |  | 2022
Deferred tax assets: |  |  |
Net operating loss carryforwards | $ | 45,314 |  |  | $ | 41,453 |
Intangible assets | 3,501 |  |  | 4,066 |
Tax credit carryforwards | 3,923 |  |  | 4,011 |
Goodwill | 4,513 |  |  | 4,920 |
Property and equipment | 3,314 |  |  | 3,644 |
Lease liability | 2,507 |  |  | 2,634 |
Inventory valuation reserves | 1,359 |  |  | 2,033 |
Allowance for doubtful accounts | 1,196 |  |  | 1,180 |
Accrued liabilities | 383 |  |  | 320 |
Accrued compensation | 485 |  |  | 491 |
Equity compensation | 132 |  |  | 536 |
Interest limitation | 137 |  |  | 1,616 |
Other | 24 |  |  | 230 |
Total gross deferred tax assets | 66,788 |  |  | 67,134 |
Valuation allowance | (59,066) |  |  | (64,960) |
Total deferred tax assets, net | 7,722 |  |  | 2,174 |
Deferred tax liabilities: |  |  |
ROU asset | (1,203) |  |  | (1,377) |
Contract asset | (5,813) |  |  | — |
Prepaid insurance and other | (406) |  |  | (393) |
Total gross deferred tax liabilities | (7,422) |  |  | (1,770) |
Net deferred tax assets | $ | 300 |  |  | $ | 404 |
As of December 31, 2023, the Company had U.S. net operating loss carryforwards (“NOLs”) of $192.9 million, including $46.4 million expiring in various amounts from 2029 through 2037 which can offset 100% of taxable income and $146.5 million that has an indefinite carryforward period which can offset 80% of taxable income per year. Additionally, the Company has an estimated $94.2 million in certain state NOL carryforwards, $0.2 million in Section 163(j) interest limitation carryforwards and $3.8 million in tax credit carryforwards. As a result of the ownership change experienced in 2023, the Company’s ability to use NOLs to reduce taxable income is generally limited by Section 382 of the Internal Revenue Code of 1986 to an annual amount, of $3.5 million plus an uplift of $24.5 million. NOLs that exceed the Section 382 limitation in any year continue to be allowed as carryforwards until they expire and can be used to offset taxable income for years within the carryover period subject to the limitation in each year. The Company’s use of new NOLs arising after the date of the ownership change would not be impacted by the Section 382 limitation. If the Company does not generate a sufficient level of taxable income prior to the expiration of the pre-2018 NOL carryforward periods, then the ability to apply those NOLs as offsets to future taxable income is lost. Based on an analysis of the Section 382 limitation, the Company estimates that $31.3 million of the state NOL carryforwards (subject to additional state-by-state analysis) and $3.8 million of the tax credit carryforwards will expire unutilized. Although the ownership change will significantly limit the ability of the Company to utilize the pre-change net operating losses and credits, the Company does not expect a significant impact to its financial statements given the valuation allowance that is recorded to estimate the realizability of the deferred tax assets. The Company’s cumulative losses (before permanent items) of $48.0 million in the recent three years ended December 31, 2023 are negative evidence that it will not likely generate sufficient future income to utilize its deferred tax assets. Therefore, the Company believes that it is not more likely than not that it will realize its deferred tax assets in all taxing jurisdictions with the exception of a portion related to the states of Louisiana and Texas. Therefore, the Company recorded a valuation allowance for the years ended December 31, 2023 and December 31, 2022 to reflect the estimated amount of deferred tax asset realizability. The change in valuation allowance was $5.2 million and $9.2 million during the years ended December 31, 2023 and 2022, respectively. The Company does not have documented plans to reinvest the unremitted earnings of its non-U.S. subsidiaries. As of December 31, 2023 and 2022, the Company had approximately $6.3 million and $6.4 million, respectively, in unremitted earnings from its foreign jurisdictions. As a result of the 2017 Tax Act these earnings have been previously taxed in the U.S. although they have not been repatriated. However, certain withholding taxes may need to be paid upon repatriation depending on the US treaty with the applicable country. Because all of the Company’s foreign earnings have been previously taxed, the requirement to record a deferred tax liability on such unremitted earnings is not applicable. The Company has performed an analysis of its tax positions for the years ended December 31, 2023 and 2022, concluding all tax positions taken were highly certain. As of December 31, 2023, the Company is not under examination in any federal/national jurisdictions. However, the 2016 and 2017 report years with respect to research and development credits are under review by the Texas Comptroller’s office. The tax returns for the years ended 2020 through 2022 remain subject to examination in the US, and the tax returns for the years ended 2019 through 2022 remain subject to examination in various state jurisdictions.

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