Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 13. INCOME TAXES

Total provision (benefit) expense for income taxes for the years ended December 31, 2022, 2021 and 2020:

	December 31,
	2022			2021			2020
(Loss) income before taxes
Domestic	$	(65,749	)	$	(17,030	)	$	5,320
Foreign		(1,641	)		4,050			(295	)
Total (loss) income before taxes		(67,390	)		(12,980	)		5,025
Current tax expense (benefit):
Federal		—			(165	)		(94	)
State		96			(36	)		205
Foreign		315			744			109
Total current tax expense (benefit)		411			543			220
Deferred tax expense (benefit):
Federal		(16,253	)		(3,506	)		(4,559	)
State		(1,977	)		(464	)		(343	)
Foreign		(909	)		170			(91	)
Change in valuation allowance		18,664			3,970			6,300
Total deferred tax (benefit) expense		(475	)		170			1,307
Total tax expense (benefit):
Federal		(16,253	)		(3,671	)		(4,653	)
State		(1,881	)		(500	)		(138	)
Foreign		(594	)		914			18
Change in valuation allowance		18,664			3,970			6,300
Total income tax (benefit) expense	$	(64	)	$	713		$	1,527

The Company accounts for income taxes under the asset and liability method, which required the recognition of deferred tax assets and liabilities for the expected future consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of differences between the financial statement and tax bases of the assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse.

The Company files income tax returns in the U.S. federal jurisdiction, various state jurisdictions and applicable foreign jurisdictions and is no longer subject to U.S. federal or state tax examinations for the years prior to 2018. The 2018 year is open in a limited scope as a result of the 2019 NOL carryback.

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. Significant components of our deferred taxes as of December 31, 2022 and 2021 were:

	December 31,
	2022			2021
Deferred tax assets:
Receivable allowances	$	356		$	213
Accrued expenses		5,351			339
S263A capitalizable costs		461			218
Inventory reserves		3,436			3,957
Research and development credits		3,615			3,249
Net operating losses		13,584			5,740
Transaction costs		—			—
Interest expense		1,218			387
Stock-based Compensation		3,324			2,208
Lease liability		384			—
R&D IRC 174(b) Capitalized Costs		3,433			—
Other		650			530
Total deferred tax assets		35,812			16,841
Valuation allowance		(28,933	)		(10,270	)
Net deferred tax assets		6,879			6,571
Deferred tax liabilities:
Property and Equipment		(5,391	)		(5,975	)
Section 481 adjustment		—			(178	)
Patents and trademarks		(1,304	)		(496	)
Right of Use Asset		(378	)		—
Total deferred tax liabilities		(7,073	)		(6,649	)
Total net deferred tax asset (liability)	$	(194	)	$	(78	)

A valuation allowance is established when it is “more likely than not” that all, or a portion, of net deferred tax assets will not be realized. As a result, the Company has concluded based on all available evidence and determined that valuation allowances of $28,933 and $10,270 should be provided for certain deferred tax assets at December 31, 2022 and 2021, respectively. As of December 31, 2022 and 2021 the Company had federal net operating loss carryforwards of $52,349 and $25,119 respectively which have an indefinite carryforward period and $52,552 of combined state net operating loss carryforwards in various states that will begin to expire in 2034. Additionally, the company has foreign net operating loss carryforwards of $6,788 that will begin to expire in 2033.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	2022		2021
Gross unrecognized tax benefits - beginning of period	$	1,337	$	627
Increases related to current year tax positions		92		102
Increases related to prior year tax positions		2		712
Decreases related to prior year tax positions		—		(104	)
Decreases related to settlements of prior year tax positions		—		—
Gross unrecognized tax benefits - end of period	$	1,431	$	1,337

The unrecognized tax benefits of $1,431, if recognized, will impact the Company’s effective tax rate. In accordance with the Company's accounting policy, accrued interest and penalties are recognized related to unrecognized tax benefits as a component of tax expense. As of December 31, 2022, no interest or penalties associated with unrecognized tax benefits have been recorded. The Company expects the total amount of tax contingencies will not decrease in 2023 based on statute of limitation expiration.

A reconciliation of the provision for income taxes at the federal statutory rate compared to the effective tax rate for the years ended December 31, 2022, 2021 and 2020 is:

	2022			2021			2020
Statutory U.S. federal tax rate	$	(14,152	)	$	(2,726	)	$	1,055
State taxes net of federal benefit		(1,901	)		(492	)		99
Non-U.S. earnings taxed at rates different than the U.S. statutory rate		(80	)		(150	)		80
Foreign source earnings, net of associated foreign tax credits		486			601			306
Benefit of tax credits		(458	)		(1,569	)		(670	)
Stock based compensation		(2,852	)		(212	)		(4,913	)
PPP loan forgiveness		—			—			(861	)
Change in valuation allowance		18,664			3,970			6,300
Change in unrecognized tax benefits		92			710			10
Other		137			581			121
Total provision (benefit) for income taxes	$	(64	)	$	713		$	1,527

As of December 31, 2022, our foreign operations held cash totaling $3,679. We have not provided for a U.S. deferred tax liability or foreign withholding tax on the undistributed earnings from our non-U.S. subsidiaries that are considered to be indefinitely reinvested. If such earnings were to be distributed, any U.S. deferred tax liability or foreign withholding tax would not be significant.