Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

15. Income Taxes

The Company’s effective income tax rate for the years ended December 31, 2022 and December 31, 2021 differ from the federal statutory rate primarily due to the Company’s valuation allowance activity.

The following is a reconciliation of the Company’s statuary U.S. federal income rate to the effective tax rate reported in the financial statements:

	Year Ended
	December 31, 2022			December 31, 2021
Statutory tax rate		21.0	%		21.0	%
State income taxes, net of federal benefit		4.0	%		2.3	%
Permanent differences		(4.6	)%		0.1	%
Return to provision		0.2	%		0.9	%
Change in valuation allowance		(34.4	)%		(18.9	)%
Change in unrecognized tax benefits		(1.3	)%		-	%
Warrants		12.6	%		(5.4	)%
Other deferred tax adjustments		1.1	%		-	%
Provision		(1.4	)%		-	%

The tax effect of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases that give rise to deferred tax assets and liabilities were as follows:

	December 31, 2022			December 31, 2021
Deferred tax assets
Accrued reserves	$	113		$	70
Deferred revenue		5			15
Accrued liabilities		705			1,428
Uniform capitalization of inventory for tax		-			148
Contribution carryover		15			13
Research and development costs		3,409			-
Operating lease liabilities		131			-
Intangible assets		9,275			5,057
Transaction costs		-			817
Disallowed interest		6,835			5,017
Stock compensation		1,497			2,113
Tax depreciation in excess of book		12			-
Net operating loss carryforwards		23,259			17,402
Gross deferred tax assets		45,256			32,080
Less: valuation allowance		(44,591	)		(30,986	)
Net deferred tax assets	$	665		$	1,094
Deferred tax liabilities
Prepaid expenses	$	(544	)	$	(530	)
Operating lease, right-of-use asset		(121	)		-
Tax depreciation in excess of book		-			(564	)
Net deferred tax liabilities	$	(665	)	$	(1,094	)
Net deferred tax liabilities	$	-		$	-

At December 31, 2022, the Company had net operating loss carryforwards of approximately $97,695. Of this amount, $1,117 expires in 2036, while the remaining amounts have an indefinite carryforward period but are subject to a limitation of 80% of taxable income each year. The Company also had state net operating loss carryforwards of approximately $44,728 with various expiration periods beginning in 2029. The Company is subject to an annual 382 limitation on the amount of net operating loss carryforward that can be used in a carryforward year.

The Company assesses available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant component of objective negative evidence identified during management’s evaluation was the cumulative loss incurred over the three-year period ended December 31, 2022. Such objective negative evidence outweighs the subjective positive evidence identified by the Company. As a result, the Company retained the full valuation allowance against its net deferred tax asset for the period ended December 31, 2022.

The Company files a consolidated federal income tax return as well as combined and separate state income tax returns in various states. For federal and certain states, the 2019 through 2021 tax years remain open for examination by the tax authorities under the normal statute of limitations. In addition, the utilization of NOL carryforwards, from periods prior to those previously mentioned may also be audited by the taxing authorities once utilized. As a result, the Company continuously monitors its current and prior filing positions in order to determine if any unrecognized tax positions need to be recorded. The analysis involves considerable judgement and is based on the best information available. In 2022, the Company identified uncertain tax positions related to executive compensation and transactions between related parties and recorded uncertain tax position liabilities. Included within the unrecognized tax benefit balance is tax benefit of $529 that, if recognized, would affect the effective tax rate. Also, the Company does not expect any of the uncertain tax benefits to significantly increase or decrease within twelve months of the reporting date. The following is a tabular roll forward of the Company’s uncertain tax position:

	December 31, 2022
Unrecognized tax benefits - beginning of year	$	-
Additions for tax positions taken in a prior year		544
Additions for tax positions taken in the current year		234
Unrecognized tax benefits - end of year	$	778