XML 36 R19.htm IDEA: XBRL DOCUMENT v3.22.4
Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Significant components of the provision for income taxes from continuing operations for the years ended December 31, 2022 and 2021 are as follows (in thousands):
Year Ended December 31,
20222021
Current provision:
Federal$— $4 
State87 20 
Total current provision87 24 
Deferred provision:
Federal82 6 
State5 30 
Total deferred provision87 36 
Total income tax provision$174 $60 
Intraperiod allocation rules require us to allocate our provision for income taxes between continuing operations and other categories or comprehensive income (loss) such as discontinued operations. As described in Note 3. Discontinued Operations, the results of our Mobile Healthcare reportable segment have been reported as discontinued operations for 2021. As a result of the intraperiod allocation rules, for the years ended December 31, 2022 and 2021, the Company recorded a tax expense of $0 thousand and $79 thousand, respectively, for discontinued operations.
Differences between the provision for income taxes and income taxes at the statutory federal income tax rate for continuing operations are for the years ended December 31, 2022 and 2021 as follows:
 Year Ended December 31,
 20222021
Income tax expense at statutory federal rate21.0 %21.0 %
State income tax expense, net of federal benefit3.8 %(0.7)%
Permanent differences and other(8.9)%5.6 %
PPP Loan Forgiveness— %10.5 %
Revaluation of deferred taxes due to change in effective state tax rates3.5 %2.4 %
Expiration of net operating loss and tax credit carryovers(66.1)%(40.6)%
Stock compensation(2.1)%(0.9)%
Reserve for uncertain tax positions and other reserves2.9 %2.6 %
Change in valuation allowance42.5 %(0.6)%
Provision for income taxes(3.4)%(0.7)%
Our net deferred tax assets (liabilities) as of December 31, 2022 and 2021 consisted of the following (in thousands):
 December 31,
 20222021
Deferred tax assets:
Net operating loss carryforwards$15,707 $19,651 
Research and development and other credits72 72 
Reserves369 477 
Operating lease liabilities1,214 2,068 
Interest carryover278 22 
Other, net1,258 785 
Total deferred tax assets18,898 23,075 
Deferred tax liabilities:
Fixed assets and other(147)(316)
Right of use assets(1,192)(1,974)
Intangibles(1,889)(2,850)
Total deferred tax liabilities(3,228)(5,140)
 Valuation allowance for deferred tax assets(15,846)(18,007)
Net deferred tax liabilities$(176)$(72)
The Company recognizes federal and state deferred tax assets or liabilities based on the Company’s estimate of future tax effects attributable to temporary differences and carryovers. The Company records a valuation allowance to reduce any deferred tax assets by the amount of any tax benefits that, based on available evidence and judgment, are not expected to be realized. In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. The Company considers projected future taxable income and planning strategies in making this assessment. As of December 31, 2022, as a result of a three-year cumulative loss and recent events, we concluded that a valuation allowance was necessary to offset substantially all of our deferred tax assets. We intend to maintain a valuation allowance until sufficient positive evidence exists to support its reversal. The Company’s valuation allowance balance at December 31, 2022 is $15.8 million, offsetting the Company’s deferred tax assets. The Company will continue to evaluate its deferred tax balances to determine any assets that are more likely than not to be realized.
As of December 31, 2022, we had federal and state income tax net operating loss carryforwards after estimated section 382 limitations of $60.9 million and $38.3 million, respectively. Federal and certain state net operating losses of $4.4 million and $2.6 million,respectively, generated after 2018 carry forward without expiration. Pre-2018 federal loss carryforwards began to expire in 2023 unless previously utilized. Federal and state loss carryforwards of approximately $16.0 million and $4.5 million expired in 2022, and approximately $1.5 million of federal net operating losses and $3.6 million of state net operating losses are set to expire in 2023, unless previously utilized. We also have federal and California research and other credit carryforwards of approximately $0.3 million and $2.1 million, respectively, as of December 31, 2022. The federal credits began to expire in 2023. The California research credits have no expiration. Pursuant to Internal Revenue Code Sections 382 and 383, use of our net operating loss and credit carryforwards may be limited because of a cumulative change in ownership greater than 50%. As of December 31, 2022, the Company has not experienced a change in ownership greater than 50%; however, some of the tax attributes acquired with the DMS Health businesses are subject to such limitations due to ownership changes of greater than 50% that may have occurred or which may occur in the future. A valuation allowance has been recognized to offset the deferred tax assets, as realization of such assets has not met the “more likely than not” threshold required under the authoritative guidance of accounting for income taxes. In addition, the net operating losses acquired in the ATRM acquisition are also limited under Internal Revenue Code Section 382.
The following table summarizes the activity related to our unrecognized tax benefits for the years ended December 31, 2022 and 2021 (in thousands):
 December 31,
 20222021
Balance at beginning of year$2,561 $2,778 
Expiration of the statute of limitations for the assessment of taxes(147)(217)
Balance at end of year$2,414 $2,561 
Included in the unrecognized tax benefits of $2.4 million at December 31, 2022 was $2.0 million of tax benefits that, if recognized, would reduce our annual effective tax rate, subject to the valuation allowance. The Company does not expect our unrecognized tax benefits to change significantly over the next 12 months.
We file income tax returns in the U.S. and in various state jurisdictions with varying statutes of limitations. We are no longer subject to income tax examination by tax authorities for years prior to 2017; however, our net operating loss carryforwards and research credit carryforwards arising prior to that year are subject to adjustment. Our policy is to recognize interest expense and penalties related to income tax matters as a component of income tax expense. The accrued interest as of December 31, 2022 and 2021, and interest and penalties recognized during the years ended December 31, 2022 and 2021 were of insignificant amounts.