INCOME TAXES

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Table 18.1: Components of Provision for/(Benefit from) Income Taxes
	For the Year Ended December 31,
	2022		2021		2020
	(in thousands)
Current provision/(benefit)
Federal	$	—	$	—	$	—
State	19		(98)		(77)
Total current	19		(98)		(77)
Deferred tax expense
Federal	37		19		27
State	(2)		51		4
Total deferred	35		70		31
Provision for/(benefit from) income taxes	$	54	$	(28)	$	(46)

Table 18.2: Reconciliation of Statutory Tax Rate to Actual Tax Rate
	For the Year Ended December 31,
	2022		2021		2020
Computed expected income tax provision	21.0	%	21.0	%	21.0	%
State income taxes, net of federal income tax benefit	3.6		1.5		1.0
Change in valuation allowance for deferred tax assets	(3.7)		(7.9)		17.0
Cumulative deferred adjustments	(0.9)		—		0.7
Provision to return adjustments	0.1		(0.4)		0.5
Other permanent differences	(0.1)		(0.2)		1.0
Dividend and accretion on preferred stock	—		—		10.5
Gain on redemption of preferred stock	—		—		(43.3)
Stock-based compensation	(20.6)		—		—
Section 162(m) limitation - covered employees	(2.0)		(16.0)		14.6
Capitalization of IPO transaction costs	—		—		4.4
Uncertain tax positions	(0.5)		(0.6)		0.2
R&D credit	3.0		2.7		(12.4)
Non-controlling interest	—		—		(15.9)
Effective tax rate	(0.1	%)	0.1	%	(0.7	%)

Table 18.3: Components of Deferred Tax Assets and Liabilities
	As of December 31,
	2022		2021
	(in thousands)
Deferred tax assets:
Accounts receivable, principally due to allowance for doubtful accounts	$	33	$	29
Allowance for inventory obsolescence and amortization	210		315
Accrued liabilities not currently deductible	1,151		1,713
Stock-based compensation	7,943		7,993
Accrued compensation	915		648
Lease liabilities	3,349		3,813
Section 163(j) interest limitation	—		54
Goodwill	34,009		37,394
Capitalized research and development costs	362		—
Net operating loss carryforwards - federal	6,034		5,681
Net operating loss carryforwards - state	1,155		1,014
R&D tax credit	3,760		2,645
Total gross deferred tax assets	58,921		61,299
Less valuation allowance	(57,559)		(55,588)
Total deferred tax assets, net of valuation allowance	1,362		5,711
Deferred tax liabilities:
Amortization and depreciation	(86)		(3,945)
Right-of-use assets	(2,034)		(2,489)
Total deferred tax liabilities	(2,120)		(6,434)
Net deferred tax liabilities	$	(758)	$	(723)

Table 18.4: Valuation Allowance Activity
	For the Year Ended December 31,
	2022		2021		2020
	(in thousands)
Balance at beginning of year	$	55,588	$	52,198	$	7,206
Additions	1,971		3,390		44,992
Balance at end of year	$	57,559	$	55,588	$	52,198

We establish a valuation allowance for deferred tax assets if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The realization of deferred tax assets is dependent upon the generation of future taxable income. We considered projected future taxable income, tax planning strategies, and reversal of taxable temporary differences in making this assessment. Based on available evidence, we have determined that a full valuation allowance is required as of December 31, 2022 and 2021. As a result of a full valuation allowance against our deferred tax assets and liabilities, a deferred tax liability related to indefinite-lived goodwill remains on our consolidated balance sheets on December 31, 2022 and 2021.

On December 31, 2022, for federal income tax purposes, there was approximately a $28.7 million net operating loss available to be carried forward to offset future taxable income. Approximately $10.6 million of these net operating loss carryforwards expire in 2037, the remaining will be carried forward indefinitely. As of December 31, 2022, there was approximately $5.0 million of R&D credit carryover which begins to expire in 2033. Certain tax attributes of the Company, including net operating losses and credits, would be subject to a limitation should an ownership change as defined under Section 382 of the Internal Revenue Code of 1986, as amended, occur. The limitations resulting from a change in ownership could affect the Company's ability to utilize its tax attributes. A study was completed in 2020 which confirmed that no limitation applies to the Company's tax attributes as of December 31, 2020. We believe that ownership activity since December 31, 2020 would not result in limitation sufficient to result in the expiration of unused attributes.

Under the provisions of ASC 740, we determined that there were approximately $1.4 million, $1.1 million, and $0.8 million of unrecognized tax benefits as of December 31, 2022, 2021, and 2020, respectively. Included in the balance of unrecognized tax benefits as of December 31, 2022, 2021, and 2020 were $0.1 million, $0.2 million, and $0.3 million, respectively, of tax benefits that, if recognized, would impact the effective tax rate. Also included in the balance of unrecognized tax benefits as of December 31, 2022, 2021, and 2020 were $1.3 million, $0.9 million, and $0.5 million, respectively, of tax benefits that, if recognized, would not impact the effective tax rate due to the Company's valuation allowance. The Company had accrued interest and penalties related to the unrecognized tax benefits of $0.1 million and $0.2 million, which were recorded in other liabilities as of December 31, 2022 and 2021, respectively.

We believe that the total amounts of unrecognized tax benefits will not significantly increase or decrease within the next 12 months. The period for which tax years are open, 2013 to 2022, has not been extended beyond the applicable statute of limitations. As of December 31, 2022, the Company is not under examination by any federal tax jurisdiction, but is currently under examination by a state tax jurisdiction.

Table 18.5: Reconciliation of the Beginning and Ending Amounts of Unrecognized Tax Benefit
	For the Year Ended December 31,
	2022		2021		2020
	(in thousands)
Balance at beginning of year	$	1,056	$	763	$	714
(Decrease)/increase in prior year tax positions	(5)		90		(104)
Increase related to current year tax positions	377		273		213
Decrease related to lapse of statutes	(71)		(70)		(60)
Balance at end of year	$	1,357	$	1,056	$	763