Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

For the year ended December 31, 2022 the Company recorded no Income tax benefit or expense. For the year ended December 31, 2021, the Company recorded a current Income tax benefit of $1.5 million. The annual effective tax rate was Nil and 1.7% for 2022 and 2021, respectively, which was driven primarily by losses for each period.

The Company is subject to state income tax in Colorado, but did not incur any income tax expense related to Colorado due to continued net operating losses. The Company is subject to mining taxes in Nevada, which are classified as income taxes as such taxes are based on a percentage of mining profits but did not incur any mining tax expense due to continued mining losses. The Company is not subject to foreign income taxes as all of the Company’s operations and properties are located within the United States.

The Company’s loss before income taxes was attributable solely to domestic operations in the United States. The components of the Company’s income tax expense (benefit) were as follows (in thousands):

	Year Ended December 31,
	2022		2021
Current
Federal	$	—	$	(1,530)
Deferred
Federal	(17,719)		(14,495)
Change in valuation allowance	17,719		14,495
Income tax benefit	$	—	$	(1,530)

For the year ended December 31, 2022, the Company incurred no net income tax expense or benefit. For the year ended December 31, 2021, the Company recorded a current Income tax benefit of $1.5 million for discrete items related estimated tax payments submitted prior to the Recapitalization Transaction as well as a carryback of 2020 net operating loss to 2018 and 2019 under the provisions of the CARES Act.

The following table provides a reconciliation of income taxes computed at the United States federal statutory tax rate of 21% in 2022 and 2021 to the income tax provision (in thousands):

	Year Ended December 31,
	2022		2021
Loss before income taxes	$	(60,828)	$	(90,094)
United States statutory income tax rate	21%		21%
Income tax (benefit) at United States statutory income tax rate	(12,774)		(18,920)
Change in valuation allowance	17,719		14,495
Warrant fair value adjustment	33		3,030
Adjustment of prior year income taxes	(4,978)		—
Other	—		(135)
Income tax benefit	$	—	$	(1,530)

For the year ended December 31, 2022, the effective tax rate was a result of an increase in the valuation allowance of $17.7 million and warrant fair value adjustment.

For the year ended December 31, 2021, the effective tax rate was a result of a decrease in the valuation allowance of $14.5 million.

The components of the Company’s deferred tax assets are as follows (in thousands):

	Year Ended December 31,
	2022		2021
Net operating loss	$	49,765	$	30,355
Mineral properties	39,322		39,371
Plant, equipment, and mine development	23,219		25,506
Intangible assets	18,698		20,204
Royalty	6,266		6,266
Asset retirement obligation	2,163		1,083
Stock-based compensation	536		856
Accrued compensation	1,258		502
Inventories	221		76
Lease liability	23		—
Valuation allowance	(141,471)		(124,219)
Total net deferred tax assets	$	—	$	—

Based on the weight of evidence available as of both December 31, 2022, and 2021, which included recent operating results, future projections, and historical inability to generate operating cash flow, the Company concluded that it was more likely than not that the benefit of its net deferred tax assets would not be realized and, as such, recorded full valuation allowances of $141.5 million and $124.2 million, respectively, against its net deferred tax assets.

The Company had net operating loss carryovers as of December 31, 2022 and 2021 of $237.5 million and $144.5 million, respectively, for federal income tax purposes. The carryforward amount as of December 31, 2022 can be carried forward indefinitely and can be used to offset taxable income and reduce income taxes payable in future periods, subject to limitations under Section 382.

Section 382 of the Internal Revenue Code imposes limitations on the use of U.S. federal net operating losses upon a more than 50% change in ownership in the Company within a three-year period. In connection with its at-the-market equity offering, the Company underwent a Section 382 ownership change on March 25, 2022. As a result, utilization of $180.7 million of the Company’s net operating losses and certain unrealized losses are limited on an annual basis. The Company’s annual limitation under Section 382 is approximately $1.3 million. If the Section 382 annual limitation amount is not fully utilized in a particular tax year, then the unused portion from that tax year is added to the Section 382 annual limitation in subsequent years.

As necessary, the Company provides a reserve against the benefits of uncertain tax positions taken in its tax filings that are more likely than not to not be sustained upon examination. Based on the weight of available evidence, the Company does not believe it has taken any uncertain tax positions that require the establishment of a reserve. The Company has not recorded any income tax reserves or related interest or penalties related to income tax liabilities as of December 31, 2022. The Company’s policy, if it were to have uncertain tax positions, is to recognize interest and/or penalties related to unrecognized tax benefits as part of its income tax expense. With limited exception, the Company is no longer subject to U.S. federal income tax audits by taxing authorities for tax years 2018 and prior; however, net operating loss and credit carryforwards from all years are subject to examinations and adjustments for at least three years following the year in which the attributes are used.