Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Components of the income tax benefit are as follows (in thousands):

	Years ended December 31,
	2022		2021
Current:
Federal	$	101	$	—
State	2		16
Foreign	—		—
Total current expense	103		16
Deferred:
Federal	—		—
State	(125)		(56)
Foreign	—		—
Total deferred benefit	(125)		(56)
Income tax benefit	$	(22)	$	(40)

The components of loss before income taxes are as follows (in thousands):

	Years ended December 31,
	2022		2021
United States	$	(42,242)	$	(30,037)
Foreign	(85)		(529)
Loss before income taxes	$	(42,327)	$	(30,566)

The income tax benefit differed from the amounts computed by applying the U.S. federal income tax rate of 21% respectively, to loss before income tax for the reasons set forth below:

	Years ended December 31,
	2022		2021
U.S. federal statutory tax rate	21.0	%	21.0	%
State income taxes, net of federal benefit	0.2		0.1
Non-U.S. income taxed at different rates	(0.1)		0.5
Increase in tax benefit related to stock-based awards	(0.4)		0.1
Increase in valuation allowance	(21.8)		(24.9)
Permanent differences related to CARES Act	—		2.6
Other	1.2		0.7
Effective income tax rate	0.1	%	0.1	%

Deferred income taxes reflect the tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the value reported for income tax purposes, at the enacted tax rates expected to be in effect when the differences reverse. The movement in the temporary differences for the year ended December 31, 2022 does not affect the estimated annual effective tax rate as it is offset by a corresponding change in the valuation allowance. The component of deferred tax assets and liabilities are as follows (in thousands):

	December 31,
	2022		2021
Deferred tax assets:
Net operating loss carryforwards	$	41,453	$	33,166
Intangible assets	4,066		2,916
Tax credit carryforwards	4,011		4,001
Goodwill	4,920		5,284
Property and equipment	3,644		3,229
Lease liability	2,634		1,750
Inventory valuation reserves	2,033		2,675
Allowance for doubtful accounts	1,180		1,184
Accrued liabilities	320		569
Accrued compensation	491		401
Equity compensation	536		399
Interest limitation	1,616		13
Other	230		291
Total gross deferred tax assets	67,134		55,878
Valuation allowance	(64,960)		(54,875)
Total deferred tax assets, net	2,174		1,003
Deferred tax liabilities:
ROU asset	(1,377)		(453)
Prepaid insurance and other	(393)		(271)
Total gross deferred tax liabilities	(1,770)		(724)
Net deferred tax assets	$	404	$	279

As of December 31, 2022, the Company had U.S. net operating loss carryforwards of $176 million, including $46.4 million expiring in various amounts from 2029 through 2037 which can offset 100% of taxable income and $129.6 million that has an indefinite carryforward period which can offset 80% of taxable income per year. The ability to utilize net operating losses and other tax attributes could be subject to a significant limitation if the Company were to undergo a change in control as defined for purposes of Section 382 of the Internal Revenue Code of 1986, as amended. The Company performed a study in which it determined that no ownership change has occurred as of December 31, 2022. However, the Company anticipates that a change in control will occur in the near term when certain convertible notes are converted during the year ended 2023. Although the

change in control will significantly limit the ability of the Company to utilize the pre-change net operating losses and credits, the Company does not expect a significant impact to their financial statements given the valuation allowance that is recorded to estimate the realizability of the deferred tax assets.

The Company’s cumulative recent losses (before permanent items) of $215.5 million in the recent thirty-six months are negative evidence that it will not likely generate sufficient future income to utilize its deferred tax assets. Therefore, the Company believes that it is not more likely than not that it will realize its deferred tax assets in all taxing jurisdictions with the exception of a portion of Louisiana and Texas. Therefore, the Company recorded a valuation allowance for the years ended December 31, 2022 and December 31, 2021 to reflect the estimated amount of deferred tax asset realizability.

The Company intends to reinvest the unremitted earnings of its non-U.S. subsidiaries. As of December 31, 2022 and 2021, the Company had approximately $7.4 million and $8.5 million, respectively, in unremitted earnings from its foreign jurisdictions. As a result of the 2017 Tax Act these earnings have been previously taxed in the U.S. although they have not been repatriated. However, certain withholding taxes may need to be paid upon repatriation depending on the US treaty with the applicable country. It is not practicable to estimate the amount of the deferred tax liability on such unremitted earnings.

The Company has performed an analysis of its tax positions for the year ended December 31, 2022, concluding all tax positions taken were highly certain.