INCOME TAXES

12 Months Ended

Dec. 31, 2024

INCOME TAXES

INCOME TAXES

19.   INCOME TAXES

The Company’s loss before income taxes was $43.7 million, $30.2 million and $37.2 million for the years ended December 31, 2024, 2023, and 2022, respectively, and was generated primarily in the United States. The Company did not record current or deferred income tax expense or benefit during the years ended December 31, 2024, 2023, and 2022.

A reconciliation of the statutory United States federal income tax rate to the Company’s effective tax rate is as follows:

	Tax Year ended December 31,
	2024		2023		2022
U.S. federal statutory income tax rate	21.0	%	21.0	%	21.0	%
State and local taxes, net of federal benefit	2.6	%	4.2	%	(0.9)	%
Nondeductible expenses	(4.6)	%	0.5	%	(2.3)	%
Research and development credits	(0.5)	%	(0.3)	%	—	%
Tax rate change and true-up	(1.3)	%	0.8	%	(1.5)	%
Net operating loss	(0.6)	%	(0.6)	%	—
Change in valuation allowance	(16.6)	%	(25.6)	%	(16.3)	%
Effective income tax rate	—	%	—	%	—	%

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets were as follows (in thousands):

	December 31,
	2024		2023
Deferred tax assets:
Net operating loss carryforwards	$	106,645	$	82,179
Research and development credits		2,699		2,923
Share-based compensation		1,788		2,538
Accruals		563		1,161
Interest expense		12,677		4,451
Lease liability		731		782
Capitalized start-up costs		6,279		—
Capitalized R&D costs		5,445		3,790
Other temporary differences		1,393		1,031
Gross deferred tax assets		138,220		98,855
Less: Valuation allowance		(133,990)		(94,472)
Total deferred tax assets	$	4,230	$	4,383
Deferred tax liabilities:
Capitalized software	$	(103)	$	(1,038)
Fixed assets		(646)		—
Right-of-use asset		(541)		(679)
Prepaid commission		(2,940)		(2,666)
Gross deferred tax liabilities		(4,230)		(4,383)
Net deferred taxes	$	—	$	—

In assessing the realizability of the net deferred tax asset, the Company considers all relevant positive and negative evidence in determining whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The realization of the gross deferred tax assets is dependent on several factors, including the generation of sufficient taxable income prior to the expiration of the net operating loss carryforwards. The Company believes that it is more likely than not that the Company’s deferred income tax asset associated with its net operating losses will not be realized in the immediate future. As such, there is a full valuation allowance against the net deferred tax assets as of December 31, 2024 and 2023. The valuation allowance increased by $7.2 million and $7.7 million during the years ended December 31, 2024 and 2023, respectively, due primarily to acquired deferred tax assets as well as the generation of

net operating losses and disallowed interest expense carryforwards. The changes in the valuation allowance were as follows (in thousands):

	Year ended December 31,
	2024		2023
Balance at the beginning of the year	$	94,472	$	86,733
Amounts acquired through purchase accounting		32,284		—
Amounts charged to expense		7,234		7,739
Balance at the end of the year	$	133,990	$	94,472

The following table summarizes carryforwards of federal net operating losses and tax credits as of December 31, 2024 (in thousands):

			Expiration
	Amount		Beginning in
Federal net operating losses	$	424,377	2025
State net operating losses	$	355,165	2025
Research and development credits	$	2,699	2025

Under the Tax Reform Act of 1986 (the “Act”), the net operating loss and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. Net operating loss and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50 percent, as defined under Sections 382 and 383 of the Internal Revenue Code, respectively, as well as similar state provisions. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. The Company has not done an analysis to determine whether or not ownership changes, as defined by the Act, have occurred since inception.

The Company will recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2024, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s Consolidated Statements of Operations. Due to net operating loss and tax credit carry forwards that remain unutilized, income tax returns for tax years from inception through 2023 remain subject to examination by the taxing jurisdictions.