Deferred Tax Assets and Liabilities

6 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

Deferred Tax Assets and Liabilities

11. Deferred Tax Assets and Liabilities

The Company had a tax net loss for the three and six months ended June 30, 2022 and 2021, and therefore has recorded no assessment of current federal income taxes. The Company is subject to minimum state taxes for various jurisdictions as well as subject to franchise taxes considered income taxes under ASC 740. A reconciliation of income tax expense at the federal statutory rate to the income tax provision at the Company's effective rate is as follows for six months ended June 30, 2022 and 2021:

	Six months ended,
	June 30, 2022			June 30, 2021
Income tax benefit at statutory rates	$	(4,008,649	)	$	(2,442,880	)
Valuation allowance for deferred tax assets		3,847,819			3,002,400
Stock-based compensation		21,935			59,074
Other (benefit) expense, net		133,121			(655,312	)
Reported income tax expense		(5,774	)		(36,718	)
Effective tax rate:		0.00	%		0.00	%

The Company’s deferred tax assets and liabilities consisted of the following as of:

	June 30, 2022			December 31, 2021
Noncurrent deferred tax assets:
Net operating loss carryforwards	$	14,939,806		$	11,999,882
Intangible assets		1,839,669			17,951
Property and equipment		434,731			686,601
Research and development credits		223,613			165,216
Accrued expenses		47,660			98,296
Bad debt reserve		9,462			—
Charitable contributions		39,807			38,447
Unexercised options		583,813			679,688
Total noncurrent deferred tax assets		18,118,561			13,686,081
Noncurrent deferred tax liabilities:
Right of use asset		529,580			568,787
Total noncurrent deferred tax liabilities		529,580			568,787
Net noncurrent deferred tax assets		17,588,981			13,117,294
Valuation allowance		(17,588,981	)		(13,124,828	)
Total net noncurrent deferred tax liabilities	$	—		$	(7,534	)

The Company assesses its deferred tax assets and liabilities to determine if it is more likely than not they will be realized; if not, a valuation allowance is required to be recorded. During the six months ended June 30, 2022, the Company recorded an indefinite-lived deferred tax asset of $1.5 million to account for the book vs. tax basis difference related to the goodwill intangible asset acquired in the Picky Bars acquisition. During the six months ended June 30, 2022, the goodwill relating to the Picky Bars stock acquisition was fully impaired for GAAP. Due to the impairment, there is a deferred tax asset associated with the indefinite-lived intangible asset. The valuation allowance is increased by the indefinite-lived intangible assets. Previously, there was an indefinite-lived deferred tax liability that was excluded from sources of future taxable income, as the timing of its reversal cannot be predicted due to the indefinite life of the goodwill and U.S. federal net operating losses (“NOLs”). A naked credit resulted due to indefinite-lived deferred tax liability's inability to reduce the valuation allowance for U.S. federal income tax purposes

As of June 30, 2022, the Company did not provide a current or deferred U.S. federal or state income tax provision or benefit for any of the periods presented because the Company has reported cumulative losses since inception. Management has determined that it was not more likely than not that the deferred tax assets would be realized, thus a full valuation allowance was recorded against the deferred tax assets. The Company may reduce the valuation allowance against definite-lived deferred tax assets at such time when it becomes more likely than not that the definite-lived deferred tax assets will be realized. The Company has recorded a provision for state income taxes and a corresponding current state tax payable of $13 thousand.

The change in the valuation allowance for deferred tax assets and liabilities for the six months ended June 30, 2022 was a net increase of $4.5 million. At June 30, 2022 and December 31, 2021, the Company had NOLs totaling approximately $90.0 million and $72.6 million, respectively. At June 30, 2022 and December 31, 2021, the Company had federal NOLs totaling approximately $1.9 million from 2017 and prior years that can be carried forward for 20 years, which begin to expire in 2036. At June 30, 2022 and December 31, 2021, the Company had federal NOLs totaling approximately $58.1 million and $46.2 million, respectively from 2018 and subsequent years that can be carried forward indefinitely. At June 30, 2022 and December 31, 2021, the Company had state NOLs totaling $30.1 million and $24.5 million, respectively, that can be carried forward for between 15 and 20 years. At June 30, 2022 and December 31, 2021, the Company had credits totaling $0.5 million and $0.4 million, respectively, that can be carried forward for between 5 and 20 years.

GAAP requires management to evaluate and report information regarding its exposure to various tax positions taken by the Company. The Company has determined whether there are any tax positions that have met the recognition threshold and has measured the Company’s exposure to those tax positions. Management believes that the Company has adequately addressed all relevant tax positions and that there are no unrecorded tax liabilities.

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. U.S. and state jurisdictions have statutes of limitations that generally range from 3 to 5 years.