Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.24.1
Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes
Note M – Income Taxes
The table below presents the current and deferred components of income tax expense (benefit) for the following periods:
Year Ended
December 31, 2023 December 31, 2022
Current:
Federal $ —  $ — 
State (73) 33 
Foreign 512  259 
Total current income tax expense (benefit) 439  292 
Deferred:
Federal 48  (6,317)
State 62  (1,963)
Foreign (1,035) 16 
Total deferred income tax expense (benefit) (925) (8,264)
Total income tax expense (benefit) $ (486) $ (7,972)

A reconciliation of the U.S. federal statutory income tax expense to actual income tax expense is as follows:
Year Ended
December 31, 2023 December 31, 2022
Income (loss) before income taxes $ (27,750) $ (138,592)
Federal statutory income tax rate 21.0  % 21.0  %
Expected federal provision (benefit) for income taxes at the federal statutory income tax rate (5,828) (29,104)
State income tax (benefit), net of federal tax benefit (1,190) (5,394)
Change in fair value of warrants 422  (3,735)
Nondeductible impairment of goodwill —  10,483 
Permanent differences 136  226 
Tax (benefits) / non-deductible expenses related to equity-based compensation 984  1,784 
Acquisition costs —  620 
Change in valuation allowance 4,808  18,498 
Other 182  (1,350)
Total income tax expense (benefit)
 $ (486) $ (7,972)
Effective tax rate 1.8  % 5.8  %
The effective tax rate for 2023 differs from the U.S. federal income tax rate of 21.0% primarily due to equity-based compensation, state income tax expense, and the valuation allowance. The effective tax rate for 2022 differs from the U.S. federal income tax rate of 21.0% primarily due to nondeductible compensation costs on the Class P Unit Incentive plan and other equity-based compensation, state income tax expense, the valuation allowance, and non-deductible impairment of goodwill.
The table below presents the components of deferred tax assets, net and deferred tax liabilities:
December 31, 2023 December 31, 2022
Deferred tax assets:
Accrued expenses and reserves $ 1,992  $ 4,997 
Capitalized research and development expenses 2,241  1,182 
Tax credit carryforwards 240  230 
Deferred revenue 1,217  — 
Net operating loss carryforwards 20,371  19,303 
Interest disallowance 6,640  4,046 
Equity-based compensation 1,580  1,053 
Lease liability 4,454  4,293 
Other assets 54  19 
Total deferred tax assets 38,789  35,123 
Less: valuation allowance (23,821) (19,013)
Deferred tax assets, net of valuation allowance 14,968  16,110 
Deferred tax liabilities:
Right-of-use asset $ (3,725) $ (3,584)
Deferred revenue
 —  (1,498)
Depreciation and amortization (13,523) (13,712)
Other (122) (571)
Deferred tax liabilities (17,370) (19,365)
Total net deferred tax assets (liabilities) $ (2,402) $ (3,255)

The Company considers whether it is more-likely-than-not that some or all of the deferred tax assets will not be realized in assessing the realizability of deferred tax assets. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which the net operating loss (“NOL”) and tax credit carryforwards are available. The Company recorded a valuation allowance against substantially all of the domestic net deferred tax assets as of December 31, 2023 and 2022, respectively. The Company intends to continue to maintain the valuation allowance until there is sufficient evidence to support the reversal of all or some portion of these valuation allowances.

The table below presents the change in valuation allowance for the following periods:
Valuation allowance as of December 31, 2021 $ (515)
Income tax expense (18,498)
Valuation allowance as of December 31, 2022 $ (19,013)
Income tax expense (4,808)
Valuation allowance as of December 31, 2023
 $ (23,821)

As of December 31, 2023, the Company had $75.3 million of net operating losses resulting in U.S. federal, state (net), and foreign deferred tax assets of $15.8 million, $3.6 million, and $0.9 million, respectively. The $15.8 million in U.S. federal net operating loss carryforwards may be carried forward indefinitely to reduce future taxable income for U.S. federal tax purposes, while certain state net operating loss carryforwards will begin to expire in 2038 and foreign net operating loss carryforwards begin to expire in 2037.
The table below presents changes in reserves for unrecognized income tax benefits for the following periods:
Year Ended
December 31, 2023 December 31, 2022
Unrecognized tax benefits, beginning of period $ 1,380  $ 1,380 
Increase (decrease) for tax positions taken related to a prior period —  — 
Increase (decrease) for tax positions taken during the current period —  — 
Unrecognized tax benefits, end of period $ 1,380  $ 1,380 

During the year ended December 31, 2023 and 2022, the Company did not recognize certain tax benefits from uncertain tax positions within the provision for income taxes. As of December 31, 2023, the Company’s estimated gross unrecognized tax benefits were $1.4 million, of which $1.3 million, if recognized, would favorably impact the Company’s future earnings. The Company believes there will be no material changes to unrecognized tax benefits within the next twelve months. Due to uncertainties in any tax audit outcome, estimates of the ultimate settlement of our unrecognized tax positions may change and the actual tax benefits may differ from the estimates. During December 31, 2023 and 2022, the Company did not recognize any interest and penalties in the consolidated statements of operations and comprehensive income (loss).

The Company and its subsidiaries file income tax returns in various U.S. and foreign jurisdictions. As of December 31, 2023, the Company is subject to examination by the IRS for tax years beginning in 2020. The Company is open to state income tax examinations until the applicable statute of limitations expires, generally four years after tax return filing; however, the ability for the taxing authority to adjust tax attribute carryforwards will continue until the applicable statute of limitations expires after tax attribute utilization or expiration.