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INCOME TAXES

12 Months Ended

Dec. 31, 2023

INCOME TAXES

INCOME TAXES

12.       INCOME TAXES

The following table provides the components of income before provision for income taxes by domestic and foreign subsidiaries:

​

​	​	​	​	​	​	​
​	​	Year Ended December 31,
​	​	2023	​	2022	​	2021
Domestic	​	($ 16,522)	​	$ 1,029	​	$ 32,804
Foreign	​	3,087	​	3,559	​	929
Total	​	($ 13,435)	​	$ 4,588	​	$ 33,733

​

The components of the provision for (benefit from) income tax expense are as follows:

​

​	​	​	​	​	​	​
​	​	Year Ended December 31,
​		2023	​	2022	​	2021
Current:	​	​	​	​	​	​
Federal	​	$ 305	​	$ -	​	$ -
State	​	795	​	737	​	456
Foreign	​	1,788	​	2,312	​	1,650
Total current income tax provision	​	2,888	​	3,049	​	2,106
Deferred	​	​	​	​	​	​
Federal	​	(4,995)	​	(11,444)	​	(41,599)
State	​	(1,494)	​	(1,674)	​	(6,574)
Foreign	​	(861)	​	(767)	​	(1,420)
Total deferred income tax benefit	​	(7,350)	​	(13,885)	​	(49,593)
Total provision (benefit) for income taxes	​	($ 4,462)	​	($ 10,836)	​	($ 47,487)

​

​

The reconciliation of the provision for income taxes at the United States federal statutory rate compared to the Company’s income tax expense as reported is as follows:

​

​	​	​	​	​	​	​
​	​	Year Ended December 31,
​		2023	​	2022	​	2021
Statutory tax rate	​	21.00%	​	21.00%	​	21.00%
State taxes	​	0.60%	​	17.52%	​	5.22%
Permanent differences	​	1.03%	​	(0.40)%	​	(0.08)%
Research & Development Credit	​	15.48%	​	(49.64)%	​	(6.04)%
Unrecognized tax benefit	​	(3.87)%	​	12.41%	​	1.51%
Share-based compensation	​	24.64%	​	(265.42)%	​	(107.20)%
Sec. 162m compensation limitation	​	(21.23)%	​	47.85%	​	8.12%
Foreign tax rate differential	​	(1.02)%	​	(1.65)%	​	0.27%
Valuation allowance	​	-%	​	-%	​	(65.54)%
Prior year true up items	​	(3.29)%	​	(19.99)%	​	(0.63)%
Other net	​	(0.13)%	​	2.13%	​	2.65%
Total	​	33.21%	​	(236.19)%	​	(140.72)%

​

The Company has made certain prior year reclassifications to research and development credit, unrecognized tax benefit, share-based compensation and other categories to ensure consistency with current year presentation. These reclassifications had no effect on total effective tax rate.

Deferred tax assets and liabilities consist of the following for the periods presented:

​

​	​	​	​	​
​		December 31, 2023	​	December 31, 2022
Deferred tax assets:	​	​	​	​
Net operating loss carryforward	​	$ 34,028	​	$ 41,192
Accruals and Reserves	​	3,127	​	3,129
Goodwill and Intangibles	​	1,782	​	257
Research and Experimental Costs	​	14,757	​	8,401
Research and Development Credit	​	4,632	​	3,826
Share-based compensation	​	15,872	​	11,871
Total gross deferred tax assets	​	74,198	​	68,676
Deferred tax liabilities:	​	​	​	​
Property and equipment	​	(2,779)	​	(3,467)
Intangibles/Goodwill	​	-	​	(656)
Right of use lease asset	​	(3)	​	(519)
Other	​	(94)	​	(55)
Net deferred tax assets	​	$ 71,322	​	$ 63,979

​

Certain prior year deferred asset amounts have been reclassified for consistency with the current year presentation. In prior year the Company reported nominal deferred tax asset balances for partnership basis difference, lease liability and legal settlement accruals, these balances were reported as part of accruals and reserves in 2023. Further, in prior year research and experimental costs were reported combined with intangible assets, these costs were stated separately in 2023. These reclassifications had no effect on gross and net deferred tax assets.

The Company accounts for deferred taxes under ASC Topic 740 – Income Taxes (“ASC 740”), which requires a reduction of the carrying amount of deferred tax assets by a valuation allowance if, based on available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed periodically based on the ASC 740 more-likely-than-not realization threshold criterion. This assessment considers matters such as future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. The evaluation of the recoverability of the deferred tax assets requires that the Company weigh all positive and negative evidence to reach a conclusion that it is more likely than not that all or some portion of the deferred tax assets will not be realized. The weight given to the evidence is commensurate with the extent to which it can be objectively verified. As of December 31, 2023, based on its assessment of the realizability of its net deferred tax assets, we reached the conclusion that our US federal, US State and foreign net deferred tax assets more-likely-than-not will be fully realized and therefore no valuation allowance was recorded.

As of December 31, 2023, the Company had federal, state and foreign net operating losses of approximately $125.8 million, $74.1 million and $12.9 million, respectively. The full amount of $125.8 million of federal net operating loss can be carried forward

indefinitely and can offset 80% of future taxable income. Certain state and foreign net operating losses will carry forward for limited number of years and, if not utilized, will begin to expire in 2024. As of December 31, 2023, the Company conducted an IRC Section 382 analysis with respect to its net operating loss carryforward and determined there was an immaterial limitation.

Undistributed earnings of the Company’s foreign subsidiaries are considered to be indefinitely reinvested and accordingly, no provision for applicable income taxes has been provided thereon. Upon distribution of those earnings, the Company would be subject to withholding taxes payable to various foreign countries. As of December 31, 2023 the undistributed earnings of the Company's foreign subsidiaries could result in withholding taxes of approximately $0.8 million, if repatriated.

As of December 31, 2023, the Company had federal and California Research and Development credits of approximately $5.8 million and $0.9 million, respectively. Federal credit can be carried forward 20 years and will begin to expire in 2039. California credit can be carried forward indefinitely.

The Company maintains liabilities for uncertain tax positions. These liabilities involve considerable judgment and estimation and are continuously monitored by management based on the best information available, including changes in tax regulations, the outcome of relevant court cases, and other information. A reconciliation of the beginning and ending amount of gross unrecognized benefits is as follows:

​

​	​	​	​	​	​	​
​	​	Year Ended December 31,
​	​	2023	​	2022	​	2021
Unrecognized tax benefits - beginning of year	​	$ 1,309	​	$ 530	​	$ -
Gross increase for tax positions of prior years	​	63	​	199	​	325
Gross increase for tax positions of current year	​	532	​	580	​	205
Unrecognized tax benefits - end of year	​	$ 1,904	​	$ 1,309	​	$ 530

​

The unrecognized tax benefits relate to Federal and California research and development credits in 2023, 2022, and 2021. As of December 31, 2023, the total amount of unrecognized tax benefits that would affect the Company effective tax rate, if recognized, is $1,904. The Company's policy is to recognize interest and penalties related to income tax matters in income tax expense. As of December 31, 2023, the Company accrued interest or penalties related to uncertain tax positions in the amount of $0. The company does not expect of the uncertain tax position to reverse during the next 12 month.

During 2022 the Company completed its federal examination for 2019 with no change to the original filing. There are no federal or state tax examinations in progress nor has it had any state tax examinations since its inception. Because the Company has net operating loss carryforwards, there are open statutes of limitations in which federal taxing authorities may examine the Company's tax returns for all years from December 31, 2011 through the current period. US State taxing authorities may examine the Company's tax return for all years from December 31, 2014 through the current period and foreign tax authorities may examine the Company’s tax return for all years from December 31, 2019 through the current period.

The Company is subject to a wide variety of tax laws and regulations across the jurisdictions where it operates. Regulatory developments from the U.S. or international tax reform legislation could result in an impact to the Company's effective tax rate. The Company continues to monitor the Base Erosion and Profit Shifting (BEPS) Integrated Framework provided by the Organization for Economic Co-operation and Development (OECD) including the legislative adoption of Pillar II by countries, and all other tax regulatory changes, to evaluate the potential impact on future periods.

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The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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