Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

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

	Year Ended December 31,
	2023		2022		2021
Domestic	$	(87,409)	$	(111,339)	$	(16,496)
Foreign	(3,321)		(239)		(1,617)
Total loss before provision for income taxes	$	(90,730)	$	(111,578)	$	(18,113)

The components of the provision for income taxes were as follows (in thousands):

	Year Ended December 31,
	2023		2022		2021
Current:
Federal	$	—	$	—	$	—
State	777		231		50
Foreign	—		—		—
Total Current	$	777	$	231	$	50
Deferred:
Federal	$	122	$	92	$	264
State	(80)		4		72
Foreign	—		—		—
Total Deferred	$	42	$	96	$	336
Total Provision for income taxes	$	819	$	327	$	386

Reconciliation of the statutory federal income tax to the Company's effective tax is as follows (amounts in thousands):

	Year Ended December 31,
	2023				2022				2021
Tax provision (benefit) at U.S. statutory rate	$	(19,053)	21.0	%	$	(23,431)	21.0	%	$	(3,804)	21.0	%
State income taxes (1)	(2,519)		2.8		(2,514)		2.3		(409)		2.3
Foreign taxes in excess of the U.S. statutory rate	175		(0.2)		10		—		74		(0.4)
Change of valuation allowance (1)	15,288		(16.9)		21,501		(19.3)		2,397		(13.2)
Change in fair value of warrant liabilities (1)	1,892		(2.1)		(4,166)		3.7		1,275		(7.1)
Share based compensation	(46)		0.1		8,804		(7.9)		1,548		(8.6)
Tax credits	1,913		(2.1)		(3,615)		3.2		(862)		4.8
Section 162(m) limitation	3,354		(3.7)		3,693		(3.3)		—		—
Other	(185)		0.2		45		—		167		(0.9)
Tax Expense	$	819	(0.9)	%	$	327	(0.3)	%	$	386	(2.1)	%

(1) Immaterial correction of error of $8.3 million to the change in fair value of warrant liabilities and related $1.8 million to state income taxes for the year ended December 31, 2022. This correction had no impact on the consolidated balance sheet as of December 31, 2022 and the consolidated statements of operations, stockholders' equity and cash flows for the year ended December 31, 2022.

Significant components for the Company's net deferred tax liabilities included in accrued expenses and other current liabilities in the consolidated balance sheets are as follows (in thousands):

	Year Ended December 31,
	2023		2022
Deferred tax assets
Accrued compensation	$	1,919	$	2,087
Operating lease liability	1,322		1,822
Share-based compensation	8,377		6,033
Net operating loss carryforwards (1)	28,430		20,984
Allowance for bad debt	306		223
Tax credits	1,702		3,615
Section 174 capitalization	12,730		5,705
Other	404		(32)
Total deferred tax assets	$	55,190	$	40,437
Valuation allowance (1)	(51,398)		(36,109)
Net deferred tax assets	$	3,792	$	4,328
Deferred tax liabilities
Depreciation and amortization	$	(3,245)	$	(3,392)
Operating lease assets	(1,107)		(1,454)
Other	—		—
Total deferred tax liabilities	$	(4,352)	$	(4,846)
Net deferred tax liabilities	$	(560)	$	(518)

(1) The components of the Company's deferred tax assets and valuation allowance as of December 31, 2022 have been adjusted to reflect immaterial corrections identified during the year ended December, 31 2023. This correction had no impact on the consolidated balance sheet as of December 31, 2022 and the consolidated statements of operations, stockholders' equity and cash flows for the year ended December 31, 2022.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management believes it is more likely than not that the deferred tax assets will not be realized; accordingly, a valuation allowance has been established on U.S. and foreign gross deferred tax assets. The Company's valuation allowance increased $15.3 million and $21.7 million during the years ended December 31, 2023 and 2022, respectively.

As of December 31, 2023, the Company has net operating loss carryforwards for federal income tax purposes of $92.4 million available to reduce future income subject to income taxes. The federal net operating loss carryforwards of $11.1 million will begin to expire, if not utilized, in fiscal year 2037. The remaining amount of federal net operating loss carryforwards will be carried forward indefinitely. In addition, the Company has $75.8 million and $25.5 million of net operating loss carryforwards available to reduce future taxable income subject to California state income taxes and all other applicable state jurisdictions, respectively. The California net operating loss carryforwards will begin to expire, if not utilized, in fiscal year 2036. The foreign net operating loss carryforwards of $0.7 million will be carried forward indefinitely. The other states’ net operating loss carryforwards will begin to expire, if not utilized, in fiscal year 2037.

Under Section 382 of the Internal Revenue Code of 1986, as amended, the Company's ability to utilize net operating loss carryforwards or other tax attributes in any taxable year may be limited if the Company has experienced an ownership change. As of December 31, 2023, the Company has concluded that it has experienced ownership changes since inception

and that its utilization of net operating loss carryforwards will be subject to annual limitations. However, it is not expected that the annual limitations will result in the expiration of the tax attribute carryforwards prior to utilization.

Changes in our unrecognized tax benefits are summarized as follows (in thousands):

	Year Ended December 31,
	2023		2022		2021
Beginning Balance	$	1,629	$	427	$	43
Additions for current year items	13		842		115
Additions for prior year items	—		360		269
Reductions for prior year items	(820)		—		—
Lapse of statute of limitations	—		—		—
Ending Balance	$	822	$	1,629	$	427

During the years ended December 31, 2023, 2022, and 2021, interest and penalties were immaterial. The Company does not expect any significant change in its unrecognized tax benefits during the next twelve months that would be material to the consolidated financial statements. All of the unrecognized tax benefits would impact the effective tax rate.

The Company is subject to taxation in the United States and various foreign jurisdictions. All net operating losses incurred to date are subject to adjustment for U.S. federal income tax purposes, except for the years 2017 to 2019, where the statute of limitations has expired, and for state income tax purposes. Furthermore, as of December 31, 2023, all tax years remain open to examination in the foreign jurisdictions where we operate in.