Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

12. Income Taxes

Loss before the provision (benefit) for income taxes consists of the following jurisdictional (loss) income:

	Year Ended December 31,
	2023			2022			2021
Domestic	$	(24,613	)	$	(11,391	)	$	4,136
Foreign		2,892			2,324			2,063
Total	$	(21,721	)	$	(9,067	)	$	6,199

The provision (benefit) for income taxes in the accompanying consolidated financial statements consists of the following:

	Year Ended December 31,
	2023			2022			2021
Current provision:
Federal	$	(4	)	$	-		$	-
State		117			66			7
Foreign		1,122			880			801
Total current		1,235			946			808
Deferred (benefit):
Federal		(5	)		(834	)		1
State		2			(168	)		2
Foreign		(67	)		4			(9	)
Total deferred		(70	)		(998	)		(6	)
Total (benefit) provision	$	1,165		$	(52	)	$	802

A reconciliation of the U.S. federal statutory rate to the Company’s effective tax rate is as follows:

	Year Ended December 31,
	2023	2022	2021
Tax at statutory rates	(21.0%)	(21.0%)	(21.0%)
State income taxes	(3.7%)	(8.8%)	3.4%
Change in tax rate	1.4%	(0.8%)	(0.2%)
Permanent differences	11.4%	18.6%	4.4%
Global intangible low-taxed income	0%	19.9%	0%
Foreign rate differential	1.0%	2.8%	(2.6%)
Research and development credits	(4.2%)	(9.1%)	7.6%
Change in valuation allowance	19.8%	(1.4%)	(3.4%)
Other, net	0.7%	(0.7%)	(1.1%)
Effective tax rate	5.4%	(0.5%)	(12.9%)

The income tax effect of each type of temporary difference and carryforward as of December 31, 2023 and 2022 is as follows:

	As of December 31,
	2023			2022
Deferred tax assets:
Net operating loss carry-forwards	$	36,936		$	41,239
Tax credit carry-forwards		15,691			14,588
Stock-based compensation		1,853			2,127
Fixed Assets		-			134
Account receivable reserves		140			340
Accrued compensation		602			1,050
Lease Liability		4,955			5,524
Capitalized research expenditures		13,234			6,733
Other temporary differences		1,159			829
Total deferred tax assets		74,570			72,564
Deferred tax liabilities:
Other deferred tax liabilities		(4,196	)		(4,046	)
ROU Asset		(4,101	)		(4,578	)
Intangible assets		(1,215	)		(3,305	)
Total deferred tax liabilities		(9,512	)		(11,929	)
Valuation allowance		(65,070	)		(60,717	)
Net deferred tax asset (liability)	$	(12	)	$	(82	)

The Company is required to compute income tax expense in each jurisdiction in which it operates. This process requires the Company to project its current tax liability and estimate its deferred tax assets and liabilities, including net operating loss (NOL) and tax credit carry-forwards. In assessing the ability to realize the net deferred tax assets, management considers whether it is more likely than not that some portion or all of the net deferred tax assets will not be realized.

The Company has provided a valuation allowance against substantially all of its remaining U.S. net deferred tax assets as of December 31, 2023 and December 31, 2022, as based upon the level of historical U.S. losses and future projections over the period in which the net deferred tax assets are deductible, at this time, management believes it is more likely than not that the Company will not realize the benefits of these deductible differences. The Company has provided a valuation allowance against the net deferred tax assets of its foreign subsidiaries as of December 31, 2023 and December 31, 2022 largely based on the significant weight of negative evidence given to the consolidated worldwide cumulative loss position for the current year and the prior two years. The increase in the valuation allowance from 2022 to 2023 of $4.4 million principally relates to the current year U.S. losses and generation of federal and state research and development tax credits.

As of December 31, 2023, the Company had federal net operating losses of approximately $154.0 million, of which $108.3 million are available to offset future taxable income, if any, through 2037 and $45.7 million which are available to offset future taxable income indefinitely. As of December 31, 2023, the Company had state net operating losses of approximately $76.5 million, of which $73.4 million are available to offset future taxable income, if any, through 2041 and $3.1 million which are available to offset future taxable income indefinitely. The Company also had federal and state research and development tax credits of $10.7 million and $6.3 million, respectively, which expire in various amounts through 2043. The net operating loss and tax credit amounts are subject to annual limitations under Section 382 change of ownership rules under the U.S. Internal Revenue Code of 1986, as amended. 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 completed an analysis covering the tax periods from inception through December 31, 2022 and performed a high level assessment of the period January 1, 2023 through December 31, 2023 to determine whether there may have been a Section 382 ownership change and determined that it is more-likely-than-not that the Company’s net operating and tax credit amounts as disclosed are not subject to any material Section 382 limitations.

Effective January 1, 2022, the Tax Cuts and Jobs Act of 2017 requires the Company to capitalize, and subsequently amortize R&D expenses over five years for research activities conducted in the U.S. and over fifteen years for research activities conducted outside of the U.S. As of December 31, 2023, the Company has recorded a deferred tax asset of $13.2 million related to the capitalized R&D expenditures which is offset by a decrease in its net operating loss carryforward.

At December 31, 2023 and 2022, the Company had no recorded liabilities for uncertain tax positions, nor any accrued interest or penalties related to uncertain tax positions.

The Company files income tax returns in the U.S. federal tax jurisdiction, various state and various foreign jurisdictions. The Company is currently open to examination under the statute of limitations by the Internal Revenue Service and state jurisdictions for the tax years ended 2020 through 2023. Since the Company is in a U.S. loss carryforward position, carryforward tax attributes generated in prior years may still be adjusted upon future examination if they have or will be used in a future period. Additionally, certain non-U.S. jurisdictions are no longer subject for income tax examinations by authorities for tax years before 2018.

No additional U.S. income taxes or foreign withholding taxes have been provided for any additional outside basis differences inherent in the Company’s foreign entities as these amounts continue to be indefinitely reinvested in foreign operations based on management’s current intentions. Determining the amount of unrecognized deferred tax liability related to any remaining undistributed foreign earnings not subject to the transition tax and additional outside basis difference in these entities (i.e., basis difference in excess of that subject to the one-time transition tax) is not practicable.