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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
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 the Company’s deferred tax assets and liabilities are as follows (in thousands):
December 31,
20222021
Deferred Tax Assets:
Net operating loss$23,719 $23,333 
Research and development and other tax credits8,384 6,297 
Interest limitation carry forward4,898 3,970 
Accrued expenses3,501 3,385 
Capitalized research and development expenditures3,586 — 
Share-based compensation3,145 4,220 
Allowance for doubtful accounts1,033 601 
Lease liabilities962 1,277 
Sales return and allowances163 195 
Accrued settlement costs50 235 
Other885 1,115 
Deferred Tax Liabilities:
Prepaid expenses(1,400)(1,337)
Right of use asset(867)(1,197)
Intangible assets(351)(263)
Property and equipment(77)(705)
Net Deferred Tax Assets47,631 41,126 
Less: Valuation allowance(47,631)(41,126)
Net Deferred Tax Assets after Valuation Allowance$— $— 
The reconciliation of the federal statutory income tax rate of 21% to the effective rate is as follows:
Year ended December 31,
202220212020
Federal statutory rate21.00 %21.00 %21.00 %
Tax credits5.85 %2.01 %0.32 %
Employee retention credit— %3.37 %— %
NOL carryback rate differential— %— %10.99 %
Meals and entertainment(0.10)%(1.13)%(0.50)%
State taxes, net of federal benefit(0.55)%4.53 %(0.20)%
Uncertain tax positions(0.58)%0.02 %0.24 %
Nondeductible compensation(2.22)%(13.77)%(0.89)%
Deferred tax adjustments(2.89)%14.63 %— %
Share-based compensation(4.03)%23.31 %(1.24)%
Valuation allowance(17.59)%(52.70)%(8.14)%
Other0.42 %(3.73)%(1.66)%
Effective tax rate(0.69)%(2.46)%19.92 %
Current and deferred income tax (benefit) expense is as follows (in thousands):
Year Ended December 31,
202220212020
Current:
Federal$— $91 $(12,418)
State206 156 159 
Total current206 247 (12,259)
Deferred:
Federal— — — 
State— — — 
Total deferred— — — 
Total expense (benefit)$206 $247 $(12,259)
Certain items of income and expense are not reported in tax returns and financial statements in the same year. The tax effects of such temporary differences are reported as deferred income tax assets and liabilities. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefit that, based on available evidence, is not expected to be realized. The Company establishes a valuation allowance for deferred tax assets for which realization is not more likely than not. As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets.
A valuation allowance of $47.6 million and $41.1 million was recorded against the deferred tax asset balance as of December 31, 2022 and 2021, respectively. The Company maintains a full valuation allowance because it is not more likely than not the deferred tax assets will be utilized based on all available positive and negative evidence. In the event that the weight of the evidence changes in the future, any reduction in the valuation allowance would result in an income tax benefit.
At December 31, 2022 and 2021, the Company had income tax net operating loss (“NOL”) carryforwards for federal and state purposes of $84.9 million and $109.8 million and $84.2 million and $104.2 million, respectively. A portion of the Company’s NOLs and tax credits are subject to annual limitations due to ownership change limitations provided by Internal Revenue Code Section 382. All of the Company’s federal NOL carryforwards have been generated since 2018 and will carry forward indefinitely. The majority of the Company’s state NOL carryforwards will expire between 2027 and 2042; the remainder of the Company’s state NOLs will carryforward indefinitely. As of December 31, 2022, the Company has recorded a deferred tax asset for both federal and state NOL carryforwards of approximately $17.8 million and $5.9 million, respectively. As of December 31, 2021, the Company has recorded a deferred tax asset for federal and state NOL carryforwards of $17.7 million and approximately $5.6 million, respectively.
Unrecognized Tax Benefits
The following is a tabular reconciliation of the total amounts of unrecognized tax benefits (in thousands) included in other liabilities in the consolidated balance sheets:
202220212020
Unrecognized tax benefits - January 1$469 $477 $627 
Increases - tax positions in current period98 20 — 
Increases - tax positions in prior period78 — — 
Decreases in prior year positions— (28)(150)
Unrecognized tax benefits - December 31$645 $469 $477 
Included in the balance of unrecognized tax benefits are tax benefits of $0.6 million and $0.5 million for the years ended December 31, 2022 and 2021, respectively, that, if recognized, would affect the effective tax rate.
The Company recognizes accrued interest related to unrecognized tax benefits and penalties as income tax expense. Related to the unrecognized tax benefits noted above, the Company accrued $0.0 million of interest during the years ended December 31, 2022 and 2021. The Company accrued and recognized $0.1 million of interest during 2020.
The Company is subject to taxation in the U.S. and various state jurisdictions. As of December 31, 2022, the Company’s tax returns for 2019 through 2022 generally remain open for exam by taxing jurisdictions. Additional prior years may be open to the extent attributes are being carried forward to an open tax year.
CARES Act
On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) which, among other changes, eliminated the taxable income limit for certain net operating losses (“NOL”), allowed businesses to carry back NOLs arising in 2018, 2019, and 2020 to the five prior years, and provided a payment delay of employer payroll taxes during 2020 after the date of enactment. These provisions allowed the Company to carry back federal tax losses related to 2018 and 2019. The Company recorded net tax receivable totaling $11.3 million in 2020 related to these provisions, of which $1.2 million had been collected as of December 31, 2020, and another $9.2 million was collected during the year ended December 31, 2021. The remaining $0.9 million is reflected in income tax receivable on the consolidated balance sheets as of December 31, 2022 and 2021.
The Company had a deferred payment of $2.2 million in employer taxes that was included as part of accrued compensation on the consolidated balance sheet as of December 31, 2021. $1.1 million was paid in January 2022 and the remaining balance paid in December 2022.