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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes

12. Income Taxes

The Company' loss before income taxes consists of the following (in thousands):

 

 

Year Ended December 31,

 

 

2023

 

 

2022

 

Domestic

 

$

(40,587

)

 

$

(174,041

)

International

 

 

(33,617

)

 

 

(18,887

)

Loss before income taxes

 

$

(74,204

)

 

$

(192,928

)

 

Significant components of the Company's benefit (expense) from income taxes are as follows (in thousands):

 

 

Year Ended December 31,

 

 

2023

 

 

2022

 

Current:

 

 

 

 

 

 

Federal

 

$

—

 

 

$

—

 

State

 

 

(197

)

 

 

(87

)

Foreign

 

 

(373

)

 

 

(405

)

Total current tax expense

 

 

(570

)

 

 

(492

)

Deferred:

 

 

 

 

 

 

Federal

 

 

—

 

 

 

—

 

State

 

 

—

 

 

 

—

 

Foreign

 

 

118

 

 

 

3,322

 

Total deferred benefit

 

 

118

 

 

 

3,322

 

Total benefit (expense) from income taxes

 

$

(452

)

 

$

2,830

 

 

Reconciliation of income taxes at the statutory rate to the benefit (expense) from income taxes recorded in the statements of operations is as follows:

 

 

Year Ended December 31,

 

 

2023

 

 

2022

 

Tax benefit at federal statutory rate

 

 

21.0

%

 

 

21.0

%

State tax expense, net of federal benefit

 

 

1.3

 

 

 

0.8

 

Foreign tax expense

 

 

8.1

 

 

 

0.8

 

NOL carryforwards expiring unutilized

 

 

(5.5

)

 

 

(22.8

)

Change in valuation allowance

 

 

(21.9

)

 

 

17.1

 

Federal R&D credit

 

 

0.2

 

 

 

0.2

 

Unrecognized tax benefit

 

 

—

 

 

 

0.9

 

Non-deductible interest/premium

 

 

—

 

 

 

(0.3

)

Non-deductible loss on Forward Sale of Preferred Stock and
   Bridge Loans

 

 

—

 

 

 

(8.0

)

R&D tax credits expiring unutilized

 

 

—

 

 

 

(5.2

)

Transaction costs

 

 

(1.5

)

 

 

—

 

Executive stock-based compensation

 

 

(2.6

)

 

 

(0.8

)

Return to provision

 

 

2.5

 

 

 

—

 

Other, net

 

 

(2.0

)

 

 

(2.2

)

Effective tax rate

 

 

(0.4

)%

 

 

1.5

%

 

 

Significant components of the Company's deferred tax assets and liabilities are as follows (in thousands):

 

 

Year Ended December 31,

 

 

2023

 

 

2022

 

Deferred tax assets:

 

 

 

 

 

 

Net operating loss carryforward

 

$

96,242

 

 

$

85,182

 

Reserves and accruals

 

 

3,152

 

 

 

3,943

 

Depreciation and amortization

 

 

564

 

 

 

563

 

Capitalized R&D costs

 

 

5,962

 

 

 

3,840

 

Tax credit carryforwards

 

 

15,463

 

 

 

14,456

 

Stock-based compensation

 

 

1,143

 

 

 

2,064

 

Right-of-use lease liabilities

 

 

7,782

 

 

 

8,663

 

Total gross deferred tax assets

 

 

130,308

 

 

 

118,711

 

Valuation allowance on deferred tax assets

 

 

(124,124

)

 

 

(107,893

)

Total deferred tax assets, net of valuation allowance

 

 

6,184

 

 

 

10,818

 

Deferred tax liabilities:

 

 

 

 

 

 

Fixed assets and intangibles

 

 

(54

)

 

 

(3,913

)

Right-of-use assets

 

 

(6,836

)

 

 

(7,729

)

Total deferred tax liabilities

 

 

(6,890

)

 

 

(11,642

)

Net deferred tax liability

 

$

(706

)

 

$

(824

)

 

 

 

 

 

 

 

Deferred tax liability per balance sheet

 

$

(841

)

 

$

(1,055

)

Less deferred tax assets included in other long-term assets

 

 

135

 

 

 

231

 

Net deferred tax liability

 

$

(706

)

 

$

(824

)

 

Utilization of the net operating loss carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by Section 382 of the Internal Revenue Code of 1986, as amended, and similar state provisions. The Company completed its Section 382 Study through December 31, 2022 and determined that an ownership change occurred on April 4, 2022 due to the issuance of preferred equity. As a result of this ownership change, a portion of net operating loss (NOL) carryforwards and all R&D credits will expire unutilized. Further limitations are also expected as a result of the merger with SomaLogic that occurred on January 5, 2024.

The Company establishes a valuation allowance for deferred tax assets if the Company determines it is more likely than not the related tax benefit will not be realized. The Company relies on several factors when assessing the realizability of deferred tax assets, including historical financial results, the Company's ability to recover net operating loss carry-forwards, the projected future operating results, and the Company's ability to use tax planning strategies.

The valuation allowances of $124.1 million and $107.9 million as of December 31, 2023 and 2022, respectively, primarily relate to temporary tax differences, net operating losses and research and development credits generated in the current and prior years. The Company believes it is more likely than not that U.S. federal and state, Canada and Netherlands deferred tax assets relating to temporary differences, net operating losses and research and development credits are not realizable. As such, full valuation allowances have been applied against the deferred tax assets relating to jurisdictions of the U.S. federal and state, Canada and Netherlands.

A reconciliation of the beginning and ending amounts of the valuation allowance for the years ended December 31, 2023 and 2022 is as follows (in thousands):

 

 

Valuation Allowance

 

December 31, 2021

 

$

141,087

 

Charges to earnings

 

 

—

 

Charges to other accounts

 

 

(33,194

)

December 31, 2022

 

 

107,893

 

Charges to earnings

 

 

—

 

Charges to other accounts

 

 

16,231

 

December 31, 2023

 

$

124,124

 

 

As of December 31, 2023, the Company had net operating loss carryforwards for U.S. federal income tax purposes of $363.5 million, and U.S. federal research and development tax credits of $0.5 million, which begin expiring in 2042. As of December 31, 2023, the

Company had net operating loss carryforwards for state income tax purposes of $220.4 million, which will expire through 2043, and California research and development tax credits of $14.0 million, which do not expire. As of December 31, 2023, we had foreign net loss carryforwards of $36.6 million, which will begin to expire in 2041, and foreign tax credit carryforwards of $6.9 million, which begin to expire in 2037.

The aggregate changes in the balance of the Company's gross unrecognized tax benefits during 2023, and 2022 were as follows (in thousands):

 

December 31, 2021

 

$

8,515

 

Increases in balances related to tax positions during a prior
   period

 

 

154

 

Increases in balances related to tax positions taken during
   current period

 

 

—

 

Decreases in balances related to tax positions taken during prior
   period

 

 

(1,697

)

December 31, 2022

 

 

6,972

 

Increases in balances related to tax positions during a prior
   period

 

 

105

 

Decreases in balances related to tax positions taken during
   current period

 

 

(138

)

December 31, 2023

 

$

6,939

 

 

As of December 31, 2023, there were no unrecognized tax benefits that, if recognized, would reduce the Company's effective tax rate. The Company does not anticipate that existing unrecognized tax benefits will significantly increase or decrease within the next 12 months.

Accrued interest and penalties related to unrecognized tax benefits was included in the income tax provision. The amount was immaterial as of December 31, 2023 and 2022.

The Company files income tax returns in the United States, its various states, and in certain foreign jurisdictions. As a consequence of having operating loss carryforwards, all tax years are open to federal and state examination in the United States. Tax years from 2012 are open to examination in various foreign countries.