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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
INCOME TAXES

NOTE 15. INCOME TAXES

The Company is subject to federal and state income taxes in the United States.

Income (loss) before income taxes was $6.6 million, $(23.0) million and $(51.7) million during the years ended December 31, 2021, 2020 and 2019, respectively.

Income tax expense consisted of the following for the respective periods:

 

 

Years Ended December 31,

 

($ in thousands)

 

2021

 

 

2020

 

 

2019

 

Current:

 

 

 

 

 

 

 

 

 

Federal

 

$

—

 

 

$

—

 

 

$

—

 

State

 

 

170

 

 

 

163

 

 

 

254

 

Total current

 

 

170

 

 

 

163

 

 

 

254

 

Deferred:

 

 

 

 

 

 

 

 

 

Federal

 

 

—

 

 

 

—

 

 

 

—

 

State

 

 

—

 

 

 

—

 

 

 

—

 

Total deferred

 

 

—

 

 

 

—

 

 

 

—

 

Income tax expense

 

$

170

 

 

$

163

 

 

$

254

 

 

The provision for income taxes differs from the tax computed using the statutory U.S. federal income tax rate as a result of the following items for the respective periods:

 

 

Years Ended December 31,

 

(In thousands, except percentages)

 

2021

 

 

2020

 

 

2019

 

Provision at federal statutory income tax rate

 

$

1,392

 

 

 

21.0

%

 

$

(4,821

)

 

 

21.0

%

 

$

(10,857

)

 

 

21.0

%

Incentive stock options

 

 

647

 

 

 

9.8

%

 

 

286

 

 

 

(1.2

)%

 

 

266

 

 

 

(0.5

)%

State income taxes

 

 

360

 

 

 

5.4

%

 

 

(446

)

 

 

1.9

%

 

 

(2,003

)

 

 

3.9

%

Transaction costs

 

 

(1,226

)

 

 

(18.5

)%

 

 

—

 

 

 

0.0

%

 

 

—

 

 

 

0.0

%

Valuation allowance

 

 

(675

)

 

 

(10.2

)%

 

 

4,999

 

 

 

(21.8

)%

 

 

12,363

 

 

 

(23.9

)%

Change in fair value of warrant liabilities

 

 

(517

)

 

 

(7.8

)%

 

 

—

 

 

 

0.0

%

 

 

—

 

 

 

0.0

%

Other

 

 

189

 

 

 

2.9

%

 

 

145

 

 

 

(0.6

)%

 

 

485

 

 

 

(1.0

)%

Effective income tax rate

 

$

170

 

 

 

2.6

%

 

$

163

 

 

 

(0.7

)%

 

$

254

 

 

 

(0.5

)%

Deferred tax assets and liabilities consist of the following as of December 31:

($ in thousands)

 

2021

 

 

2020

 

Deferred tax assets:

 

 

 

 

 

 

Federal net operating loss carryforwards

 

$

26,721

 

 

$

27,847

 

State net operating loss carryforwards

 

 

4,703

 

 

 

5,133

 

Operating lease liabilities

 

 

1,284

 

 

 

—

 

Other

 

 

2,762

 

 

 

1,892

 

Gross deferred tax assets

 

 

35,470

 

 

 

34,872

 

Valuation allowance

 

 

(33,336

)

 

 

(34,011

)

Deferred tax assets, net of valuation allowance

 

 

2,134

 

 

 

871

 

Deferred tax liabilities:

 

 

 

 

 

 

Operating lease right-of-use asset

 

 

(1,187

)

 

 

—

 

Property and equipment

 

 

(874

)

 

 

(865

)

Other

 

 

(73

)

 

 

(6

)

Gross deferred tax liabilities

 

 

(2,134

)

 

 

(871

)

Net deferred income taxes

 

$

—

 

 

$

—

 

As of December 31, 2021, the Company had federal net operating loss carryforwards of $119.7 million to offset future taxable income, of which $21.9 million expires at various dates ranging from 2036 through 2037 if not utilized, with the remaining $97.8 million having no expiration. The Company also has U.S. state net operating loss carryforwards of $102.7 million, of which $67.8 million expires at various dates ranging from 2032 through 2040 if not utilized, with the remaining $34.9 million having no expiration.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax-planning strategies in making this assessment. As a result of historical cumulative losses, the Company has determined that, based on all available evidence, there was substantial uncertainty as to whether it will recover recorded net deferred taxes in future periods. Therefore, the Company recorded a full valuation allowance equal to the amount of the net deferred tax assets as of December 31, 2021 and 2020. The valuation allowance decreased by $0.7 million during the year ended December 31, 2021, and increased $5.0 million and $12.4 million during the years ended December 31, 2020 and 2019, respectively.

The Internal Revenue Code contains provisions that limit the utilization of net operating loss carryforwards and tax credit carryforwards if there has been an ownership change. Such ownership change, as described in Section 382 of the Internal Revenue Code, may limit the Company’s ability to utilize its net operating loss carryforwards and tax credit carryforwards on a yearly basis. To the extent that any single-year limitation is not utilized to the full amount of the limitation, such unused amounts are carried over to subsequent years until the earlier of utilization or the expiration of the relevant carryforward period. The Company determined that an ownership change occurred on February 10, 2017. An analysis was performed and while utilization of net operating losses would be limited in years prior to December 31, 2020, subsequent to that date, there is no limitation on the Company’s ability to utilize its net operating losses. As such, the ownership change has no impact to the carrying value of the Company’s net operating loss carryforwards or ability to use them in future years.

Uncertain Tax Positions

During the years ended December 31, 2021, 2020 and 2019, the Company had no uncertain tax positions.

Income Tax Audits

The Company files in U.S. federal and various state income tax jurisdictions. The Company is subject to U.S. federal and state income tax examinations by authorities for all tax years beginning in 2017 due to the accumulated net operating losses that are carried forward.