Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 10 — Income Taxes

Domestic and international income (loss) before income taxes consisted of the following:

	Year Ended December 31,
	2022			2021
United States	$	6,567		$	(12,142	)
Foreign		(1,497	)		118
Income (loss) before income taxes	$	5,070		$	(12,024	)

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts for income tax purposes. The significant components of deferred tax assets and liabilities consist of the following:

	As of December 31,
	2022			2021
Deferred tax assets:
Net operating loss carryforwards – domestic	$	20,565		$	12,610
Net operating loss carryforwards – foreign		1,537			1,220
Intangible assets		11,671			12,426
Nonqualified stock options		387			—
Accruals and reserves		582			1,398
163(j) interest limitation		1,024			324
Other		22			60
Total deferred tax assets		35,788			28,038
Valuation allowance		(35,780	)		(28,027	)
Total deferred tax assets, net of allowance	$	8		$	11
Deferred tax liabilities:
Other	$	(8	)	$	(11	)
Total deferred tax liabilities		(8	)		(11	)
Total deferred tax assets, net	$	—		$	—

Management regularly assesses the ability to realize deferred tax assets recorded based upon the weight of available evidence, including such factors as recent earnings history and expected future taxable income on a jurisdiction-by-jurisdiction basis. In the event that the Company changes its determination as to the amount of realizable deferred tax assets, the Company will adjust its valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made. The Company’s management believes that, based on a number of factors, it is more likely than not, that all or some portion of the deferred tax assets will not be realized; and accordingly, for the year ended December 31, 2022, the Company has provided a valuation allowance against the Company’s U.S. net deferred tax assets. The net change in the valuation allowance for the year ended December 31, 2022 was an increase of $7,753, including $200 established in accounting for the reverse recapitalization.

The Company had net operating loss carryforwards (“NOL”) for federal, state and foreign income tax purposes of approximately $85,430, $60,478 and $5,801, respectively, as of December 31, 2022. The Company's state NOL will begin to expire in 2039 and all of the Company's federal NOL will last indefinitely.

The Internal Revenue Code of 1986, as amended (the “Code”), imposes restrictions on the utilization of NOLs in the event of an “ownership change” of a corporation. Accordingly, a company’s ability to use net operating losses may be limited as prescribed under Code Section 382 (“IRC Section 382”). Events which may cause limitations in the amount of the NOLs that the Company may use in any one year include, but are not limited to, a cumulative ownership change of more than 50% over a three-year period. Utilization of the federal and state NOLs may be subject to substantial annual limitation due to the ownership change limitations provided by the IRC Section 382 and similar state provisions.

ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of December 31, 2022 and 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.

Under the Tax Cuts and Jobs Act of 2017, research and development costs are no longer fully deductible and are required to be capitalized and amortized for U.S. tax purposes effective January 1, 2022. The mandatory capitalization requirement had no material impact to the Company during the year ended December 31, 2022.

The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. Management believes all the income tax returns filed since inception remain open to examination by the major domestic and foreign taxing jurisdictions to which the Company is subject due to net operating loss carry forwards.

The provision for income taxes differs from the amount estimated by applying the statutory federal income tax rate to net loss before taxes as follows:

	Year Ended December 31,
	2022			2021
Federal tax expense (benefit) at statutory rate	$	1,065		$	(2,525	)
State income tax expense (benefit) at statutory rate, net of federal benefit		238			(359	)
Permanent differences		—			282
Deferred tax asset true-ups		(266	)		6
Rate change		(329	)		—
Change in valuation allowance		7,753			2,626
Stock-based compensation		195			—
Change in fair value of warrants		(9,011	)		—
Nondeductible compensation under 162(m)		353
Other adjustments, net		2			(30	)
Provision for income taxes	$	—		$	—