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Income Tax
12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Tax Income Tax
For financial reporting purposes, loss before income taxes includes the following (in thousands):

Year Ended December 31,
202320222021
Domestic$(16,749)$(62,539)$(109,393)
Foreign(4,822)(3,170)(1,402)
Loss before income taxes$(21,571)$(65,709)$(110,795)

The provision (benefit) for income taxes consisted of the following (in thousands):

Year Ended December 31,
202320222021
Current:
Federal$532 $— $— 
State1,456 563 252 
Total current provision1,988 563 252 
Deferred:
Federal12 (339)(2,280)
State(25)(110)(966)
Foreign— (145)(142)
Total deferred benefit(13)(594)(3,388)
Total provision (benefit) for income taxes$1,975 $(31)$(3,136)

The provision (benefit) for income taxes differs from the amounts computed by applying the statutory federal income tax rate of 21% to pretax loss as follows (in thousands):

Year Ended December 31,
202320222021
Tax benefit at federal statutory rate$(4,530)$(13,799)$(23,267)
State taxes, net of federal benefits1,636 (609)(3,498)
Transaction costs— (731)369 
Stock-based compensation1,747 3,897 2,018 
Warrants and earn-outs226 (15)(1,710)
Non-deductible officers' compensation6,386 2,881 8,352 
Change in valuation allowance1,330 7,794 15,971 
Research and development credits
(5,398)— — 
Non-deductible expenses714 613 — 
Other, net(136)(62)(1,371)
Total$1,975 $(31)$(3,136)
The components of deferred tax assets and liabilities are as follows (in thousands):

As of December 31,
20232022
Deferred tax assets:
Net operating loss carryforwards$53,309 $67,214 
Research and other credits3,779 — 
Capitalized research and development15,106 — 
Accrued expenses and reserves2,164 1,952 
Stock-based compensation3,572 4,079 
Inventory1,890 2,338 
Other intangible assets350 487 
Deferred revenue124 17 
Operating lease liabilities2,615 1,382 
Other deferred tax assets87 553 
Total gross deferred tax assets82,996 78,022 
Less valuation allowance(70,506)(69,357)
Total deferred tax assets12,490 8,665 
Deferred tax liabilities:
Other intangible assets(4,777)(5,623)
Fixed assets(1,532)(1,722)
Prepaid expenses(1,825)— 
Operating lease right-of-use assets
(2,519)(1,285)
Other deferred tax liabilities(1,859)(70)
Total deferred tax liabilities(12,512)(8,700)
Net deferred tax liabilities$(22)$(35)

The Company determines its valuation allowance on deferred tax assets by considering both positive and negative evidence to ascertain whether it is more likely than not that deferred tax assets will be realized. Realization of deferred tax assets is dependent upon the generation of future taxable income, if any, the timing and amount of which are uncertain. Due to the Company's history of losses, the Company believes that it is not more likely than not that all of the deferred tax assets can be realized as of December 31, 2023 and 2022. Accordingly, the Company has recorded a valuation allowance against its deferred tax assets. The Company intends to continue maintaining a full valuation allowance on all deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. However, the Company believes that, within a few years, sufficient positive evidence may become available to reach a conclusion that a significant portion of the valuation allowance will no longer be needed. A release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change on the basis of the level of profitability that the Company is actually able to achieve. Additionally, income tax credit estimates could change in the near future due to changes in economic circumstances resulting in the pursuit of additional credits that currently would not be economically beneficial to pursue. The net deferred tax liability is primarily the result of acquired intangible assets for which there is no tax basis. The valuation allowance increased by $1.1 million and $8.0 million during the years ended December 31, 2023 and 2022, respectively.

As of December 31, 2023, the Company has $186.1 million, $154.8 million, and $10.8 million in federal, state, and foreign loss carryforwards (not tax effected), respectively, of which $186.1 million, $17.5 million, and $10.8 million in federal, state, and foreign loss carryforwards do not expire. The remaining state loss carryforwards begin to expire in 2024. As of December 31, 2023, the Company had $6.1 million of federal tax credit carryforwards, prior to the netting of uncertain tax positions, that will begin to expire in 2041.

Internal Revenue Code Sections 382 and 383 place a limitation on the amount of taxable income that can be offset by carryforward tax attributes, such as net operating losses or tax credits, after a change in control. Generally, after a change in control, a loss corporation cannot deduct carryforward tax attributes in excess of the limitation prescribed by Sections 382 and
383. Therefore, certain of the Company’s carryforward tax attributes may be subject to an annual limitation regarding their utilization against taxable income in future periods. As a result of issuances of different classes of preferred stock to investors in 2017, 2018, and 2019, the Company triggered “ownership change(s)” as defined in Section 382 and related provisions. Some of the Company’s net operating losses are limited by these ownership changes but the annual limitation does not have a significant impact on the consolidated financial statements. Subsequent ownership changes may subject the Company to annual limitations of its net operating losses. Such annual limitations could result in the expiration of the net operating loss and credit carryforwards before utilization. A full valuation allowance exists on the net operating loss carryforward.

The Company did not have any unrecognized tax benefits during the years ended December 31, 2022 and 2021. Changes in unrecognized tax benefits for the year ended December 31, 2023, excluding interest and penalties, were as follows (in thousands):

Balance at December 31, 2022$— 
Increases in balances related to prior year tax positions
1,357 
Increases in balances related to current year tax positions
956 
Balance at December 31, 2023$2,313 

Although it is reasonably possible that certain unrecognized tax benefits may increase or decrease within the next 12 months due to tax examination changes, settlement activities, expirations of statute of limitations, or the impact on recognition and measurement considerations related to the results of published tax cases or other similar activities, the Company does not anticipate any significant changes to its unrecognized tax benefits over the next 12 months. Any adjustments to the Company’s uncertain tax positions would result in an adjustment to its deferred tax asset carryforwards and valuation allowance rather than resulting in an impact to the effective tax rate. During the years ended December 31, 2023, 2022, and 2021, no interest or penalties were required to be recognized relating to unrecognized tax benefits.

The Company files income tax returns in the United States, United Kingdom, and various state and local jurisdictions. Due to the net operating loss carryforward, the statute of limitations is open for 2017 and forward for all jurisdictions, none of which are currently under examination by any tax authorities.