Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

17. Income Taxes

The benefit from income taxes on continuing operations for the years ended December 31, 2021 and 2020 is comprised of the following:

	2021			2020
Current:
Federal	$	-		$	-
State		(705	)		16
Total current		(705	)		16
Deferred:
Federal		24			23
State		14			14
Total deferred		38			37
(Benefit) provision from income taxes	$	(667	)	$	53

The Company performs an analysis each year to determine whether the expected future income will more likely than not be sufficient to realize the deferred tax assets. The Company’s recent operating results and projections of future income weighed heavily in the Company’s overall assessment. As a result of this analysis, the Company continues to maintain a full valuation allowance against its federal and state net deferred tax assets at December 31, 2021 as the Company believes that it is more likely than not that these assets will not be realized. In the current year, the company maintains a full valuation allowance in consolidation and no separate company deferred tax liability recorded will be recorded.

The tax effects of significant items comprising the Company’s deferred tax assets and (liabilities) as of December 31, 2021 and 2020 are as follows:

	2021			2020
Deferred tax assets:
Federal net operating loss carryforwards	$	24,923		$	17,015
State net operating loss carryforwards		3,498			2,953
Compensation		1,844			1,492
Allowances and reserves		585			436
Intangible assets		571			292
State taxes		942			900
Credit carryforward		2			229
163(j) interest		1,047			745
Leases		41			54
Deferred revenue		95			95
Valuation allowance		(33,170	)		(23,684	)
		378			527
Deferred tax liability:
Property and equipment		(471	)		(582	)
Deferred tax liability-net valuation allowance	$	(93	)	$	(55	)

The Company’s deferred tax asset and deferred tax liabilities are included within Other long-term liabilities, respectively, within the consolidated balance sheet as of December 31, 2021 and 2020. Federal tax attribute carryforwards at December 31, 2021, consist primarily of approximately $118.6 million of federal net operating losses. In addition, the Company has approximately $56.3 million of state net operating losses carryforwards post 382 ownership change. The utilization of the federal carryforwards as an available offset to future taxable income is subject to limitations under federal income tax laws. Under current federal income tax law, federal NOLs incurred in tax years beginning after December 31, 2017 may be carried forward indefinitely, but the deductibility of such federal NOLs is limited to 80% of Federal Taxable Income, and current state net operating losses not utilized begin to expire this year.

The NOL carry forwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. NOL, and tax credit carry forwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, as well as similar state tax provisions. The amount of the annual limitation, if any, will be determined based on the value of our company immediately prior to an ownership change. Subsequent ownership changes may further affect the limitation in future years. Additionally, U.S. tax laws limit the time during which these carry forwards may be applied against future taxes, therefore, we may not be able to take full advantage of these carry forwards for federal income tax purposes. During 2021, the Company completed a 382 assessment of the available NOLs under Section 382 and determined that the Company underwent an ownership change on March 30, 2017 and July 15, 2019 and as a result, NOLs attributable to the pre-ownership change are subject to a substantial annual limitation under Section 382 of the Internal Revenue Code due to the multiple ownership changes. The Company has adjusted their NOL carryforwards to address the impact of the 382 ownership change. Federal Net Operating Losses of $71.2 million are subject to annual limitation as of the ownership changes for ownership changes. The remaining $47.4M of NOLs incurred post July 15, 2019 are not subject to any annual limitation and can be carried forward indefinitely.

A reconciliation of the difference between the federal statutory tax rates and the Company’s effective tax rate from continuing operations is as follows:

	2021			2020
Federal statutory rate		21.0	%		21.0	%
State income tax rate, net of Federal tax benefit		4.2	%		4.0	%
Meals and entertainment		(0.1	%)		(0.1	%)
Valuation allowance		(25.3	)%		(25.0	%)
Naked credit		(0.2	%)		(0.1	%)
NJ NOL credit sale		4.7	%		0.0	%
Effective tax rate		4.3	%		(0.2	%)

The following table summarizes the change in uncertain tax benefit reserves for the two years ended December 31, 2020:

	Unrecognized
	Tax Benefits
Balance of unrecognized benefits as of January 1, 2020	$	877
Additions for tax positions of prior years		-
Balance as of January 1, 2021	$	877
Additions for tax positions of prior years		-
Balance as of December 31, 2021	$	877

As of December 31, 2021 and 2020, the total amount of gross unrecognized tax benefits was $0.9 million and $0.9 million, respectively. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of December 31, 2021 and 2020 was $0.9 million and $0.9 million, respectively.

The Company recognized interest and penalties of $0.2 million and $0.3 million, respectively, related to uncertain tax positions in income tax expense during each of the years ended December 31, 2021 and 2020. At December 31, 2021 and 2020, accrued interest and penalties, net were $3.6 million and $3.4 million, respectively, and included in the Other long-term liabilities in the consolidated balance sheets.

The Company and its subsidiaries file a U.S. Federal consolidated income tax return and consolidated and separate income tax returns in numerous states and local tax jurisdictions. The following tax years remain subject to examination as of December 31, 2021:

Jurisdiction	Tax Years
Federal	2017 – 2021
State and Local	2016 – 2021

To the extent there was a failure to file a tax return in a previous year; the statute of limitation will not begin until the return is filed. There were no examinations in process by the Internal Revenue Service as of December 31, 2021.