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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Note 19. Income Taxes The components of loss before income taxes are as follows (in thousands):
|  | Year Ended December 31, |
|  | 2022 |  |  | 2021 |
Domestic |  | $ | (15,598 | ) |  | $ | (16,006 | )
Foreign |  |  | — |  |  |  | (126 | )
Loss before income taxes |  | $ | (15,598 | ) |  | $ | (16,132 | )
The total income tax expense for the years ended December 31, 2022 and 2021 was $14,000 and $2,000, respectively, and is comprised of current state taxes and foreign taxes withheld by governmental agencies outside of the United States, as follows (in thousands):
|  | Year Ended December 31, |
|  | 2022 |  |  | 2021 |
Current: |  |  |  |  |  |
Federal |  | $ | — |  |  | $ | — |
State |  |  | (13 | ) |  |  | (2 | )
Foreign |  |  | (1 | ) |  |  | — |
Total current tax (expense) |  |  | (14 | ) |  |  | (2 | )
Deferred: |  |  |  |  |  |
Federal |  |  | — |  |  |  | — |
State |  |  | — |  |  |  | — |
Foreign |  |  | — |  |  |  | — |
Total deferred tax (expense) |  |  | — |  |  |  | — |
Total tax (expense) |  | $ | (14 | ) |  | $ | (2 | )
The Company operates in only one federal jurisdiction, the United States. The following is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:
|  | Year Ended December 31, |
|  | 2022 |  |  | 2021 |
Expected income tax provision at the federal statutory rate |  |  | 21.0 | % |  |  | 21.0 | %
State taxes, net of federal benefits |  |  | 16.0 | % |  |  | (20.1 | )%
Impact of Section 382 Study |  |  | — |  |  |  | (10.4 | )%
Change in valuation allowance |  |  | (40.9 | )% |  |  | (0.4 | )%
Transaction costs |  |  | — |  |  |  | (1.0 | )%
Derivative liability |  |  | 4.1 | % |  |  | 11.7 | %
Contingent Consideration Release |  |  | 0.1 | % |  |  | — |
Non-controlling interest |  |  | (0.3 | )% |  |  | (1.9 | )%
Gain on debt extinguishment |  |  | — |  |  |  | 1.5 | %
Other |  |  | (0.1 | )% |  |  | (0.4 | )%
Income tax provision |  |  | (0.1 | )% |  |  | — |
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, net operating loss carryforwards (“NOLs”) and other tax credits. Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):
|  | As of December 31, |
|  | 2022 |  |  | 2021 |
Deferred tax assets: |  |  |  |  |  |
Net operating loss carryforwards |  | $ | 19,654 |  |  | $ | 14,586 |
Unearned revenue |  |  | — |  |  |  | 1 |
Stock-based compensation |  |  | 4,541 |  |  |  | 3,677 |
Accrued payroll and benefits |  |  | 296 |  |  |  | 3 |
Research and development credits |  |  | 16 |  |  |  | 16 |
Fixed asset basis difference |  |  | 54 |  |  |  | 73 |
Inventory reserve |  |  | 445 |  |  |  | 422 |
Charitable contributions |  |  | 2 |  |  |  | 2 |
Income from partnerships |  |  | 97 |  |  |  | 163 |
Lease liability |  |  | 531 |  |  |  | 752 |
Contingent consideration |  |  | — |  |  |  | 456 |
Allowance for bad debt |  |  | 65 |  |  |  | 27 |
Amortized intangibles |  |  | 819 |  |  |  | 660 |
Goodwill |  |  | 393 |  |  |  | 366 |
Section 174 Capitalization |  |  | 340 |  |  |  | — |
Total deferred tax assets |  |  | 27,253 |  |  |  | 21,204 |
Deferred tax liabilities: |  |  |  |  |  |
Right of use asset |  |  | (486 | ) |  |  | (699 | )
Amortizable intangibles |  |  | — |  |  |  | — |
Income from partnerships |  |  | — |  |  |  | — |
Other |  |  | — |  |  |  | — |
Total deferred tax liabilities |  |  | (486 | ) |  |  | (699 | )
Less valuation allowance |  |  | (26,767 | ) |  |  | (20,505 | )
Net deferred tax assets |  | $ | — |  |  | $ | — |
Realization of the deferred tax assets is dependent upon future taxable income, if any, the amount and timing of which are uncertain. Accordingly, the net deferred tax assets have been offset by a valuation allowance. The net valuation allowance increased by $6.3 million during the year ended December 31, 2022 and decreased by $6,000 during the year ended December 31, 2021. At December 31, 2022, the Company had federal and state NOLs aggregating approximately $81.1 million and $47.5 million, respectively. At December 31, 2022, the utilization of a portion of the federal NOLs is subject to an annual limitation under Section 382 of the Internal Revenue Code (IRC). Of the $222.3 million of federal NOLs available, approximately $141.2 million are expected to expire unutilized due to ownership changes as defined in IRC Section 382. If not utilized, the federal and state NOLs will begin to expire in 2023 and 2024, respectively. IRC Section 382 may also limit NOLs generated in future years. The Company evaluates deferred tax assets, including the benefit from NOLs, to determine if a valuation allowance is required. Such evaluation is based on consideration of all available evidence using a “more likely than not” standard with significant weight being given to evidence that can be objectively verified. This assessment considers, among other matters, the nature, frequency, and severity of current and cumulative losses; forecasts of future profitability; the length of statutory carryforward periods; the Company’s experience with operating losses; and tax-planning alternatives. The significant piece of objective negative evidence evaluated was the cumulative loss incurred through the year ended December 31, 2022. Given this evidence and the expectation to incur operating losses in the foreseeable future, a full valuation allowance has been recorded against the net deferred tax asset. The Company will continue to maintain a full valuation allowance against the entire amount of its net deferred tax asset, until such time as the Company has determined that the weight of the objectively verifiable positive evidence exceeds that of the negative evidence and it is likely that the Company will be able to utilize all of its net deferred tax asset relating to its federal and state NOL carryforwards. Although the Company has established a full valuation allowance on its net deferred tax asset, for Federal tax losses before 2018 and for all state tax losses, it has not forfeited the right to carryforward tax losses up to 20 years and apply such tax losses against taxable income in such years, thereby reducing its future tax obligations. Federal tax losses generated in 2018 and later do not expire. The Company is subject to taxation in the United States and various state jurisdictions. As of December 31, 2022, the Company’s tax years for 2003 through 2022 are generally subject to examination by the tax authorities. The years are open back to 2003 to the extent the NOLs being carried forward were generated then. As of December 31, 2022, the Company had the following unrecognized tax benefits (in thousands):
|  | Year Ended December 31, |
|  | 2022 |  |  | 2021 |
Unrecognized tax benefit beginning balance |  | $ | 17 |  |  | $ | 17 |
Increases for tax positions taken in prior years |  |  | — |  |  |  | — |
Decreases for tax positions taken in prior years |  |  | (1 | ) |  |  | — |
Increases for tax positions taken in current years |  |  | — |  |  |  | — |
Settlements |  |  | — |  |  |  | — |
Unrecognized tax benefit ending balance |  | $ | 16 |  |  | $ | 17 |
In February 2023, the Company received notification from the Internal Revenue Service that our Archipelago joint venture was selected for audit for the 2021 tax year. The Opening Conference is scheduled for April 24, 2023, and Management has not yet received the IRS agent’s Initial Document Request. The Company is currently not under audit for state purposes. The Company does not anticipate its total unrecognized tax benefits as of December 31, 2022 will significantly change due to settlement of examination or the expiration of statute of limitations during the next 12 months. The Company is currently unaware of any uncertain tax positions that could result in significant additional payments, accruals or other material deviation in this estimate over the next 12 months.

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- 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
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