XML 27 R15.htm IDEA: XBRL DOCUMENT
v3.23.1

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Loss before provision for income taxes was generated from the following sources (in thousands):
| Year Ended December 31,
| 2022 |  | 2021
Domestic | $ | (29,539) |  |  | $ | (31,301) |
Foreign | 486 |  |  | 473 |
Total loss before provision for income taxes | $ | (29,053) |  |  | $ | (30,828) |
A summary of the income tax expense is as follows (in thousands):
| Year Ended December 31,
| 2022 |  | 2021
Current: |  |  |
Federal | $ | — |  |  | $ | — |
State | 8 |  |  | 5 |
Foreign | 157 |  |  | 152 |
Total current | 165 |  |  | 157 |
Deferred: |  |  |
Federal | 24 |  |  | 24 |
State | 37 |  |  | 35 |
Foreign | — |  |  | (1) |
Total deferred | 61 |  |  | 58 |
Total income tax expense | $ | 226 |  |  | $ | 215 |
A reconciliation of the provision for income taxes to the amount of income tax expense that would result from applying the federal statutory rate to the loss before income taxes is as follows:
| Year Ended December 31,
| 2022 |  | 2021
Federal statutory rate | 21.0 | % |  | 21.0 | %
State tax, net of federal benefit | 4.1 |  |  | 4.3 |
Equity compensation | (1.5) |  |  | 0.4 |
International tax items | (3.9) |  |  | 0.1 |
Foreign taxes | (0.5) |  |  | (0.5) |
State NOL true-up | (1.2) |  |  | 1.2 |
Miscellaneous | 1.8 |  |  | (0.4) |
Effect of change in rate | 0.7 |  |  | 0.8 |
Change in valuation allowance | (21.1) |  |  | (27.6) |
| (0.8) | % |  | (0.7) | %
The major components of the Company’s deferred tax assets and liabilities are as follows (in thousands):
| Year Ended December 31,
| 2022 |  | 2021
Deferred income tax assets |  |  |
Net operating loss carry forwards | $ | 48,317 |  |  | $ | 47,204 |
Research and development expenses | 5,100 |  |  | — |
Intangibles | 4,907 |  |  | 6,259 |
Credit carry forwards | 3,028 |  |  | 3,027 |
Nondeductible accruals | 453 |  |  | 532 |
163j Limitation | 333 |  |  | — |
Fixed assets | 289 |  |  | 84 |
Equity-based compensation | 188 |  |  | 208 |
Deferred rent | 15 |  |  | 33 |
Other | 3 |  |  | 7 |
Total deferred income taxes - net | 62,633 |  |  | 57,354 |
Deferred income tax liabilities |  |  |
Prepaid expenses | (92) |  |  | (80) |
Unrealized translation gain/loss | (21) |  |  | (45) |
Total deferred income liabilities- net | (113) |  |  | (125) |
Valuation allowance | (62,698) |  |  | (57,346) |
Net deferred income tax liabilities | $ | (178) |  |  | $ | (117) |
The Company has federal and state net operating loss (“NOL”) carryforwards of approximately $185.4 million and $150.8 million, respectively, at December 31, 2022, to reduce future cash payments for income taxes. The federal NOL carryforwards generated prior to 2018 will expire from 2031 through 2037 and state NOL carryforwards will expire 2023 through 2041. Federal NOL carryforwards generated in 2018 and thereafter have no expiration date. The Company has federal and state tax credit carryforwards of approximately $2.5 million and $0.7 million, respectively, at December 31, 2022. These tax credits will begin to expire in 2028. To the extent that an ownership change has occurred under Internal Revenue Code Sections 382 and 383, the Company’s use of its loss carryforwards and credit carryforwards to offset future taxable income may be limited. At December 31, 2022 and 2021, the Company had unrecognized tax benefits, including interest and penalties, of approximately $0.4 million. The Company’s gross unrecognized tax benefits as of December 31, 2022 and 2021 and the changes in those balances are as follows (in thousands):
| Year Ended December 31,
| 2022 |  | 2021
Beginning balance | $ | 412 |  |  | $ | 428 |
Other | — |  |  | (16) |
Gross unrecognized tax benefits, ending balance | $ | 412 |  |  | $ | 412 |
The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense, however during 2022 and 2021, the Company did not recognize any interest or penalties. There were no cumulative interest and penalties at December 31, 2022 and 2021. The Company does not anticipate any material changes to unrecognized tax benefits within the next twelve months that will affect the effective tax rate. In assessing whether a valuation allowance is required, significant weight is given to evidence that can be objectively verified. A significant factor in the Company’s assessment is that the Company was in a three-year historical cumulative loss as of the end of fiscal 2022. In addition, the Company was also in a loss for fiscal year 2017 and 2018 These facts, combined with uncertain near-term market and economic conditions, reduced the Company’s ability to rely on projections of future taxable income in assessing the realizability of its deferred tax assets. After a review of the four sources of taxable income as of December 31, 2022 (as described in Note 1), and after consideration of the Company’s continuing cumulative loss position as of December 31, 2022, the Company recorded a valuation allowance related to its U.S.-based deferred tax assets of $62.7 million at December 31, 2022. The valuation allowance on deferred tax assets increased by $5.4 million and $7.9 million in 2022 and 2021, respectively. The Company is subject to U.S. federal income tax as well as to income tax of multiple state jurisdictions. Currently there are no audits in process or pending from Federal or state tax authorities. The Company is no longer subject to examination for U.S. federal income tax returns for years before December 31, 2018 and for state income tax returns, the Company is no longer subject to examination for years before December 31, 2017. As of December 31, 2022, the Company had no outstanding tax audits. The outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income tax in the period such resolution occurs. As of December 31, 2022, a current estimate of the range of changes that may occur within the next twelve months cannot be made due to the uncertainty regarding the timing of these events. For financial reporting purposes, income before provision for income taxes for the Company’s foreign subsidiaries was $0.5 million for both years ended December 31, 2022 and 2021. Smith Micro does not provide for U.S. taxes on its unremitted earnings of foreign subsidiaries that have not been previously taxed since the Company intends to invest such undistributed earnings indefinitely outside of the U.S. The 2017 US Tax Cuts and Jobs Act subjects a U.S. shareholder to current tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries. The Company's accounting policy is to recognize the tax on GILTI as a period expense in the period the tax is incurred. The current income related to the GILTI inclusion in 2022 is $5.9 million.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration