Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Note 20. Income Taxes

The components of loss before income taxes are as follows (in thousands):

	Year Ended December 31,
	2021			2020
Domestic	$	(16,006	)	$	(6,150	)
Foreign		(126	)		—
Loss before income taxes	$	(16,132	)	$	(6,150	)

The total income tax (expense) benefit for the years ended December 31, 2021 and 2020 was $(2,000) and $124,000, 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,
	2021			2020
Current:
Federal	$	—		$	—
State		(2	)		28
Foreign		—			(10	)
Total current tax (expense) benefit		(2	)		18
Deferred:
Federal		—			84
State		—			22
Foreign		—			—
Total deferred tax (expense) benefit		—			106
Total tax (expense) benefit	$	(2	)	$	124

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,
	2021			2020
Expected income tax provision at the federal    statutory rate		21.0	%		21.0	%
State taxes, net of federal benefits		(20.1	)%		9.4	%
Impact of section 382 study		(10.4	)%		—
Change in valuation allowance		(0.4	)%		(43.8	)%
Transaction costs		(1.0	)%		(2.2	)%
Derivative liabilities		11.7	%		22.4	%
Non-Controlling Interest		(1.9	)%		(4.7	)%
Gain on debt extinguishment		1.5	%		—
withholding taxes		—			(0.2	)%
Other		(0.4	)%		—
Income tax provision		—			1.9	%

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,
	2021			2020
Deferred tax assets:
Net operating loss carryforwards	$	14,586		$	15,478
Unearned revenue		1			2
Stock-based compensation		3,677			3,881
Accrued payroll and benefits		3			236
Research and development credits		16			16
Fixed asset basis difference		73			84
Inventory reserve		422			491
Charitable contributions		2			3
Income from partnerships		163			—
Lease liability		752			1,622
Contingent consideration		456			531
Allowance for bad debt		27			—
Amortized intangibles		660			—
Goodwill		366			—
Total deferred tax assets		21,204			22,344
Deferred tax liabilities:
Right of use asset		(699	)		(1,548	)
Amortizable intangibles		—			(98	)
Income from partnerships		—			(13	)
Other		—			(174	)
Total deferred tax liabilities		(699	)		(1,833	)
Less valuation allowance		(20,505	)		(20,511	)
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 decreased by $6,000 during the year ended December 31, 2021 and increased by $1.9 million during the year ended December 31, 2020.

At December 31, 2021, the Company had federal and state NOLs aggregating approximately $64.2 million and $23.9 million, respectively. At December 31, 2021, 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 $208.1 million of federal NOLs available, approximately $144.0 million are expected to expire utilized due to ownership changes as defined in IRC Section 382. The Company is currently conducting additional analysis regarding the valuation of the Company at the time of the ownership changes to assess what, if any, portion of the $144.0 million limitation may be restored, but the NOL deferred tax asset as recorded currently reflects the full limitation. If not utilized, the federal and state NOLs will begin to expire in 2022 and 2024, respectively. IRC Section 382 may also limit NOLs generated in future years. The Company is currently conducting additional analysis regarding the valuation of the Company at the time of the ownership change to assess what, if any, portion of the limitation may be reversed. The Company’s ownership shift analysis was performed through December 31, 2021.

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, 2021. 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, 2021, the Company’s tax years for 2002 through 2021 are generally subject to examination by the tax authorities. The years are open back to 2002 to the extent the NOLs being carried forward were generated then.

As of December 31, 2021, the Company had the following unrecognized tax benefits (in thousands):

	Year Ended December 31,
	2021		2020
Unrecognized tax benefit beginning balance	$	17	$	—
Increases for tax positions taken in prior years		—		2
Decreases for tax positions taken in prior years		—		—
Increases for tax positions taken in current years		—		15
Settlements		—		—
Unrecognized tax benefit ending balance	$	17	$	17

The Company is currently not under audit for federal or state purposes. The Company does not anticipate its total unrecognized tax benefits as of December 31, 2021 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.