Income Taxes

12 Months Ended

Dec. 31, 2021

Income Taxes [Abstract]

Income Taxes

15. Income Taxes

Income tax expense consists of the following (in thousands):

	Year Ended December 31,
	2021			2020
Current:
Federal	$	—		$	—
State		22			21
		22			21
Deferred:
Federal		23			129
State		(11	)		125
		12			254
Income tax expense	$	34		$	275

Deferred tax assets and liabilities are determined based on the differences between the consolidated financial statement carrying amounts and tax bases of assets and liabilities using enacted tax rates in effect for years in which differences are expected to reverse.

Significant components of the Company’s deferred tax liability for federal income taxes consisted of the following:

	December 31,
	2021			2020
Deferred tax assets (liabilities) (in thousands)
Net operating loss carryforwards	$	46,596		$	45,819
Intangible assets		1,039			1,450
Inventory		26			51
Reserves and accrued expenses		1,230			896
Property and equipment		441			(178	)
Stock-based compensation		458			808
Operating lease right-of-use assets		(159	)		(249	)
Goodwill		(950	)		(815	)
Operating lease liability		177			272
481(a) adjustment		(667	)		—
Less: valuation allowance		(48,457	)		(48,308	)
Net deferred tax liability	$	(266	)	$	(254	)

In assessing the need for a valuation allowance, management must determine that there will be sufficient taxable income to allow for the realization of deferred tax assets. Based upon the historical and anticipated future losses, management has determined that the deferred tax assets do not meet the more likely than not threshold for realizability. Accordingly, a nearly full valuation allowance has been recorded against the Company’s deferred tax assets as of December 31, 2021 and 2020. The valuation allowance increased by $0.1 million and $1.2 million during the years ended December 31, 2021 and 2020, respectively. The Company does not have unrecognized tax benefits as of December 31, 2021 or 2020. The Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.

The Company had net operating loss (“NOL”) carryforwards for federal and state income tax purposes as follows (in thousands):

	December 31,
Combined NOL carryforwards:	2021		2020
Federal	$	204,314	$	200,976
State	$	60,654	$	43,501

The NOL carryforwards generated prior to 2018 begin expiring in 2022 for federal and 2030 for state income tax purposes. Federal and many state NOLs generated in 2018 and into the future now have an indefinite life.

The NOL carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. NOL carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code, respectively, as well as similar state provisions. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. To date, the Company has not performed an analysis to determine whether or not ownership changes have occurred since inception.

A reconciliation of income tax expense at the statutory federal income tax rate and income taxes as reflected in the consolidated financial statements is as follows:

	December 31,
Rate reconciliation:	2021			2020
Federal tax expense at statutory rate		21.00	%		21.00	%
State tax, net of federal benefit		(0.33	)%		6.59	%
Permanent differences		8.90	%		(2.75	)%
Other difference and true ups		(25.27	)%		(2.58	)%
Change in valuation allowance		(5.57	)%		(28.90	)%
Tax provision		(1.27	)%		(6.64	)%