Annual report pursuant to Section 13 and 15(d)

Income Tax

v3.24.0.1
Income Tax
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Tax Income Tax
Net loss before income taxes was attributable to the following geographic locations for the fiscal years 2023, 2022 and 2021 (in thousands).
Fiscal Years
2023 2022 2021
United States $ (207,948) $ (51,496) $ (125,797)
Foreign (6,817) (126) (77)
Net loss before income taxes $ (214,765) $ (51,622) $ (125,874)
During the fiscal year 2023, the Company recorded tax provision benefit on foreign jurisdictions as the Company received certain income from the foreign entities. The Company also recorded a valuation allowance against deferred tax assets in certain foreign tax jurisdictions. There was no provision for income taxes recorded on U.S. as the Company generated net operating losses and a full valuation allowance was recorded against all U.S. federal and state net deferred tax assets. The following table summarizes the provision (benefit) for income taxes (in thousands).
Fiscal Year
2023
Current:
Foreign $ 180 
Total current 180 
Deferred:
Foreign (813)
Total deferred (813)
Total provision $ (633)
During the fiscal years 2022 and 2021, there was no provision for income taxes recorded as the Company generated net operating losses and a full valuation allowance was recorded against all U.S. federal and state net deferred tax assets.
The following table shows the differences between the effective tax rate and the U.S. federal statutory tax rate for the fiscal years 2023, 2022 and 2021.
Fiscal Years
2023 2022 2021
Federal statutory tax rate 21.0  % 21.0  % 21.0  %
State and local income taxes, net of federal benefit 5.8  % 16.2  % 3.7  %
Foreign rate differential 0.1  % —  % —  %
Non-deductible warrant expense 0.6  % 30.6  % (9.4  %)
Transaction costs (0.1  %) —  % —  %
Federal tax credits 3.8  % (1.7  %) 0.3  %
Share-based compensation (1.4  %) (3.5  %) (0.8  %)
Impact of changes in valuation allowance (26.6  %) (62.4  %) (14.6  %)
Uncertain position (1.9  %) —  % —  %
Rate change 1.2  % —  % —  %
Other (2.2  %) (0.2  %) (0.2  %)
Effective tax rate 0.3  % —  % —  %
The following table shows the components of deferred tax assets (liabilities) as of December 31, 2023 and January 1, 2023.
December 31, 2023 January 1,
2023
Gross deferred tax assets:
Lease liabilities $ 2,317  $ 2,479 
Inventory reserve 523  — 
Deferred revenue 1,056  1,056 
Share-based compensation 5,481  4,455 
Capitalized research and experimental expenses 24,031  11,891 
Credit carryovers 11,149  3,926 
Net operating losses 112,707  82,113 
Transaction costs 1,390  1,502 
Depreciation and amortization 6,615  1,347 
Other 296  — 
Total gross deferred tax assets 165,565  108,769 
Valuation allowance (164,207) (107,053)
Total deferred tax assets, net of valuation allowance 1,358  1,716 
Deferred tax liabilities:
Intangible assets (10,091) — 
Inventory fair value adjustment (439) — 
Right-of-use asset (1,625) (1,716)
Other (6) — 
Total deferred tax liabilities (12,161) (1,716)
Net deferred tax liabilities $ (10,803) $ — 
As of December 31, 2023, the Company had $479.4 million of state loss carryovers, $368.6 million of federal loss carryovers, and $7.3 million of foreign loss carryovers that could be utilized to reduce the tax liabilities of future years. The tax-effected loss carryovers were $42.4 million for state before federal effect, $77.4 million for federal and $1.8 million for foreign as of December 31, 2023. The Company also had $12.3 million of state research and development (“R&D”) tax credit carryovers, $12.0 million of federal R&D tax credit carryovers and $0.3 million of foreign R&D tax credit carryovers as of December 31, 2023.
The state losses expire between 2028 and 2043. Approximately $128.0 million of the federal losses expire between 2026 and 2037 and the remainder do not expire. The federal credit carryovers expire between 2027 and 2043. The state credit carryovers do not expire. Utilization of net operating losses and tax credit carryforwards are subject to certain limitations under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, due to historical changes in the Company’s ownership, as defined in current income tax regulations. A portion of the carryforwards may expire before being applied to reduce future income tax liabilities.
Valuation allowances are provided when necessary to reduce deferred tax assets to the amount expected to be realized. Significant judgement is required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, the Company considers all available evidence, including past operating results, estimates of future taxable income, and the feasibility of tax planning strategies. In the event the Company changes its determination as to the amount of deferred tax assets that can be realized, it will adjust the valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.
As of December 31, 2023, the Company recognized a full valuation allowance against its U.S. federal, state and certain foreign net deferred tax assets, including operating loss carryovers and credit carryovers. The Company evaluated the realizability of its net deferred tax assets based on all available evidence, both positive and negative, which existed as of December 31, 2023. The Company’s conclusion to maintain a full valuation allowance against its U.S. federal, state and certain foreign net deferred tax assets was based upon the assessment of its ability to generate sufficient future taxable income in future periods.
The following table summarizes the activities related to unrecognized tax benefits for the fiscal years 2023, 2022 and 2021.
Fiscal Years
2023 2022 2021
Balance at beginning of fiscal year $ 4,428  $ 5,048  $ 4,368 
Increases related to current year tax positions 4,543  549  537 
Increases related to the prior year tax positions 3,192  12  143 
Decreases related to prior year tax positions —  (1,181) — 
Balance at end of fiscal year $ 12,163  $ 4,428  $ 5,048 
As of December 31, 2023 and January 1, 2023, none of the amounts of unrecognized tax benefits would favorably affect the effective income tax rate in future periods if recognized, since the tax benefits would increase a deferred tax asset that is currently offset by a full valuation allowance.
As of December 31, 2023, the Company has not identified any unrecognized that benefits where it is reasonably possible that it will recognize a decrease within the next 12 months. If the Company does recognize such a decrease, the net impact on the Consolidated Statement of Operations would not be material.
The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense on the Consolidated Statement of Operations. For the fiscal years 2023, 2022 and 2021, no interest expense was recognized relating to income tax liabilities. There were no accrued interest or penalties related to income tax liabilities as of December 31, 2023 and January 1, 2023.
The Company files income tax returns in the U.S. federal jurisdiction and in the California and Florida state jurisdiction. In the normal course of business, the Company is subject to examination by taxing authorities in the U.S. The Company is not currently under examination by any taxing authority.