Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

13. Income Taxes

The Company does not have any foreign operations and therefore has not provided for any foreign taxes.

The components of the benefit from income taxes were as follows (in thousands):

	Year Ended December 31,
	2021			2020
Current income taxes:
Federal	$	270		$	—
State		355			150
Total current income taxes		625			150
Deferred income taxes:
Federal		(500	)		(2,334	)
State		(747	)		(442	)
Total deferred income taxes		(1,247	)		(2,776	)
Total benefit from income taxes	$	(622	)	$	(2,626	)

A reconciliation of the United States federal statutory rate to the Company’s effective income tax rate is as follows for the years indicated:

	Year Ended December 31,
	2021			2020
U.S. federal statutory rate		21.0	%		21.0	%
Permanent adjustments		(3.8	)%		(0.4	)%
State taxes, net of federal benefit		5.0	%		6.2	%
Stock/equity-based compensation expense		(11.6	)%		6.2	%
Valuation allowance		(4.2	)%		—	%
State rate change		—	%		(4.8	)%
Other adjustments		0.1	%		—	%
Effective income tax rate		6.5	%		28.2	%

The Company recorded a benefit from income taxes of $0.6 million and $2.6 million for the years ended December 31, 2021 and 2020, respectively. For the years ended December 31, 2021 and 2020, the Company's tax benefit was primarily driven by the current year loss the Company generated.

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

	Year Ended December 31,
	2021			2020
Deferred tax assets:
Net operating loss carryforwards	$	9,801		$	12,350
Accrued expenses		3,212			1,466
Stock/equity-based compensation expense		840			115
Deferred transaction costs		237			262
Interest expense carryforward		1,645			1,891
Restructuring liability		317			583
Other		(618	)		116
Total deferred tax assets		15,434			16,783
Valuation allowance		(392	)		—
Total deferred tax assets, net of valuation allowance		15,042			16,783
Deferred tax liabilities:
Amortization		(19,266	)		(22,254	)
Total deferred tax liabilities		(19,266	)		(22,254	)
Net deferred tax liabilities	$	(4,224	)	$	(5,471	)

As of December 31, 2021, the Company had U.S. federal and state net operating loss carryforwards of $36.9 million and $34.0 million, respectively. The federal net operating loss carryforwards will expire at various dates beginning in 2032. State net operating loss carryforwards will expire at various dates beginning in 2023. The Company had federal and state net operating losses that do not expire of $32.3 million and $4.4 million, respectively that are included in the cumulative balances.

Management has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. As required by the provisions of ASC 740, Income Taxes (“ASC 740”), the Company has determined that it is more-likely-than-not that it will utilize the tax benefits related to the federal and state deferred tax assets that will be realized for financial reporting purposes, except for a portion of net operating losses ("NOLs") due to historic ownership changes in the Company as described below. The U.S. net deferred tax liability primarily relates to intangible assets recognized in the financial statements which generate a deferred tax liability. The net deferred tax liability established is estimated to be a source of income to utilize previously unrecognized deferred tax assets in the U.S.

Future changes in Company ownership may limit the amount of net operating loss carryforwards and research and development credit carryforwards that can be utilized annually to offset future taxable income and taxes, respectively. In general, an ownership change, as defined by Section 382 of the Internal Revenue Code of 1986, as amended, results from transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50 percentage points over a three-year period. The Company has undertaken a formal study and concluded that ownership changes occurred in 2015 and 2019. The Company has calculated an annual limitation on the amount of NOLs that can be used due to these ownership changes and has determined some NOLs are subject to expiration as a result of being generated prior to the Tax Cuts and Jobs Act. These NOLs are subject to a 20-year period and are offset against the valuation allowance the Company has taken. The Company's study has concluded no ownership change occurred as

of September 30, 2021 as a result of the IPO and does not believe additional ownership changes occurred as of December 31, 2021.

Unrecognized Tax Benefits

The Company accounts for uncertain tax positions under the recognition and measurement criteria of ASC 740. For those tax positions for which it is more likely than not that a tax benefit will be sustained, the Company records the largest amount of tax benefit with a greater than 50% likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. If the Company does not believe that it is not more likely than not that a tax benefit will be sustained, no tax benefit is recognized. As of December 31, 2021, the Company had no unrecognized tax benefits.

The Company recognizes interest and penalties related to uncertain tax positions as a component within income tax expense. As of December 31, 2021, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s consolidated statements of operations and comprehensive loss. The statute of limitations for assessment by the Internal Revenue Service (“IRS”) and state tax authorities is open for all tax years.

The Company is subject to U.S. federal income tax as well as income tax in various state jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities within these jurisdictions. The Company is not currently under examination for income tax examination in any domestic or foreign jurisdiction. The Company is currently under sales and use tax audits in certain jurisdictions.