Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

A reconciliation of income taxes computed at the statutory federal income tax rate to income taxes as reflected in the financial statements is summarized as follows:

	Year Ended December 31,
	2021		2020
Federal income tax expense at statutory rate	(21.0)	%	(21.0)	%
State income tax, net of federal benefit	(4.8)		(5.7)
Permanent differences	(1.8)		1.4
Change in state tax rate	(0.1)		(0.1)
Changes of state net operating losses	2.8		(0.3)
Change in stock options and restricted stock	(4.9)		0.3
Change in valuation allowance	29.8		25.2
Other	—		0.2
Effective tax rate	0.0	%	0.0	%

The Company's deferred tax assets and liabilities for the periods indicated are summarized below:

	December 31,
(In thousands)	2021		2020
Deferred tax assets:
Net operating loss carryforward	$	36,136	$	28,496
Stock options and restricted stock	4,805		5,051
Interest expense	244		220
Inventory reserve	399		272
Allowance for doubtful accounts	17		50
Accrued expenses	1,073		1,190
Deferred revenue	880		5
Leasehold improvements and equipment	74		32
Intangibles	95		85
Operating leases	85		96
	43,808		35,497
Less: Valuation allowance	(43,363)		(35,244)
Total deferred tax assets	445		253
Deferred tax liabilities:
Prepaid expenses	(445)		(253)
Total deferred tax liabilities	(445)		(253)
Net deferred tax assets (liabilities)	$	—	$	—

As of December 31, 2021 and 2020, the Company maintained a full valuation allowance against the entire deferred income tax balance which resulted in an effective tax rate of 0% for both of the years ended December 31, 2021, and 2020. The Company increased its valuation allowance by approximately $8.1 million to $43.3 million as of December 31, 2021 from $35.2 million as of December 31, 2020. For fiscal year 2021, the Company identified no U.S. tax on global intangible low-taxed income (GILTI) due to a loss.

As of December 31, 2021, the Company’s net operating loss (NOL) carryforwards for federal and state income tax purposes are approximately $138.1 million and $106.6 million, respectively, portions of which begin to expire in the years ending December 31, 2023 and 2022, respectively. The Company’s federal NOL carryforward of $98.1 million generated in tax years beginning after December 31, 2017 may be carried forward indefinitely but the deductibility of such NOL carryforwards in taxable years beginning after December 31, 2020, is limited to 80% of taxable income.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID-19 pandemic. The CARES Act, among other provisions, increases the limitation on the allowed business interest expense deduction from 30% to 50% of adjusted taxable income for tax years beginning January 1, 2019 and 2020 and allows businesses to immediately expense the full cost of Qualified Improvement Property, retroactive to tax years beginning on or after January 1, 2018 . Additionally, the CARES Act permits NOL carryforwards and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The CARES Act has not materially impacted the Company’s income tax provision.

Under the Internal Revenue Code of 1986, as amended (the Code), certain ownership changes may subject the Company to annual limitations on the utilization of its net operating loss carryforwards. The Company determined that stock issued during fiscal year 2021 did not create a change in control under the Section 382 of the Code. The Company will continue to analyze the potential impact of any additional transactions undertaken upon the utilization of the net operating losses on a go forward basis.

The Company is currently not under examination by the Internal Revenue Service or any other major income tax jurisdiction. The Company has not identified any material uncertain tax positions requiring a reserve as of December 31, 2021 or December 31, 2020.