INCOME TAXES

9 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 13. INCOME TAXES

For the nine months ended September 30, 2023, the Company recorded a $0.3 million tax expense related to its foreign operations. The Company’s tax expense for the nine months ended September 30, 2023 differs from the tax expense computed by applying the U.S. statutory tax rate to its year-to-date pre-tax loss of $48.3 million, as no tax benefits were recorded for current year tax losses generated in the U.S. and other foreign jurisdictions. At September 30, 2023, the Company had deferred tax assets primarily related to U.S. Federal and state tax loss carryforwards and a deferred tax liability related to the Company’s convertible notes. The Company provided a valuation allowance against its net deferred tax assets as future realization of such assets is not more likely than not to occur.

For the three months September 30, 2023, the Company recorded $0.1 million of tax expense related to an uncertain tax position in a foreign jurisdiction. The Company recorded no US Federal and state income taxes as it generated tax losses for the nine months ended September 30, 2023 for which a tax benefit is not recorded.

The Company’s policy is to record interest and penalties associated with reserves for uncertain tax positions as a component of income tax expense. As of September 30, 2023, the Company has not recorded interest or penalties associated with its uncertain tax positions. As of September 30, 2023, the Company has unrecognized tax benefits of $13.7 million. If recognized, $0.1 million of unrecognized tax benefits would impact the Company’s effective tax rate. The Company does not anticipate that its reserve for uncertain tax positions will change significantly within the next 12 months. The Company’s US Federal and state tax returns are generally open to examination for all periods due to its net operating losses. The Company’s foreign tax returns are generally open to examination for a period of four years following the date such tax returns were filed. The Company is not currently under examination by any tax authority.

The following represents the total amount of unrecognized tax benefits as of September 30, 2023 (in thousands):

Balance as of December 31, 2022	$	13,596
Increases for nine months ending September 30, 2023	131
Balance as of September 30, 2023	$	13,727

Australia Research and Development (R&D) Tax Incentive

The Australian government offers an R&D tax incentive to help companies conducting eligible R&D activities in Australia in the form of refundable tax credit if certain conditions are met. Management assesses the Company’s R&D activities and expenditures to determine which activities and expenditures are likely to be eligible under the tax incentive regime. Annually, management estimates the refundable tax credit available to the Company based on available information and submits an application to the Australian tax authority for R&D credit approval. The Company recognizes the refundable R&D tax credit when there is reasonable assurance that the terms have been met, income will be received, the relevant expenditure has been incurred and the consideration can be reliably measured. The refundable R&D tax credit is recorded as a reduction to research and development expense in the condensed consolidated statements of operations when the aforementioned criteria are met. In July 2023, the Company received a $1.1 million refundable R&D tax credit for its R&D activities conducted in 2022. The Company provided for a full reserve against the refundable R&D tax credit as sustainability of the credit upon potential examination by the Australian tax authority is uncertain. The Company does not currently believe it is probable that any penalties or interest would be assessed to the extent that the credit is not sustained.