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INCOME TAXES
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
For financial reporting purposes, loss before provision for income taxes, includes the following components (in thousands):
Year Ended December 31,
20242023
Domestic
$(25,729)$(30,191)
Foreign
(5,409)(5,001)
Loss before provision for income taxes
$(31,138)$(35,192)
Provision for Income Taxes
The provision for income taxes consists of the following (in thousands):
Year Ended December 31,
20242023
Current:
Federal
$119 $553 
State
12 2 
Foreign
2,369 1,122 
Total current
2,500 1,677 
Deferred:
Federal
— — 
State
— — 
Foreign
— — 
Total Deferred tax
— — 
Provision for income taxes
$2,500 $1,677 
Income tax (provision) benefit related to continuing operations differ from the amounts computed by applying the statutory income tax rate of 21% to pretax loss as follows:
Year Ended December 31,
20242023
U.S. Federal (provision) benefit
At Statutory Rate
21.0 %21.0 %
State Taxes
1.6 %1.3 %
Valuation Allowance
(26.3)%(20.9)%
Foreign Tax Differential
(2.7)%(3.4)%
Tax Credits
4.1 %2.2 %
Stock Based Compensation
(2.3)%(3.6)%
Foreign Earnings and Adjustments
2.2 %1.6 %
Foreign Withholding Tax
(5.4)%(1.6)%
Other
(0.2)%(1.4)%
Total
(8.0)%(4.8)%
Deferred Tax Assets and Liabilities
Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):
Year Ended December 31,
20242023
Deferred Tax Assets:
Federal & State NOL carryforward
$1,632 $1,337 
Research & Other credits
9,238 8,425 
Capitalized R&D16,561 12,821 
Deferred revenue
12,150 9,838 
Reserves and accruals
1,493 1,192 
Stock-based compensation
1,188 1,387 
Other intangibles
681 549 
Lease liabilities
491 498 
Total Gross Deferred tax asset
43,434 36,047 
Less: Valuation allowance
(41,505)(33,768)
Total Deferred tax assets
$1,929 $2,279 
Deferred Tax Liabilities:
Other intangibles$(354)$(417)
Property and equipment
(585)(903)
Prepaid expenses
(544)(480)
Right-of-use assets
(446)(479)
Total Gross Deferred tax liabilities
$(1,929)$(2,279)
Net Deferred tax assets
$— $— 
 
The provisions of ASC 740, require an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. For the years ended December 31, 2024 and 2023, based on all available objective evidence, including the existence of cumulative losses, the Company determined that it was not more likely than not that the net deferred tax assets were fully realizable. Accordingly, the Company determined that a full valuation allowance against its U.S. (federal and state), French and China deferred tax assets is appropriate. The Company intends to maintain a full valuation allowance on net deferred tax assets until sufficient positive evidence exists to support reversal of the valuation allowance. During the years ended December 31, 2024, and 2023, the valuation allowance was $41.5 million and $33.8 million, respectively.
The valuation allowance increased by $7.7 million and $9.1 million during the years ended December 31, 2024, and 2023, respectively, primarily due to changes in the U.S. research and development tax credits, stock compensation deferred tax assets, and capitalized research and experimental expenses.
Net Operating Loss and Tax Credit Carryforwards
As of December 31, 2024, the Company had no net operating loss carryforward for federal income tax purposes. The Company had a total state net operating loss carryforward of approximately $18.0 million, which will begin to expire in 2030. Utilization of some of the federal and state net operating loss and credit carryforwards are subject to annual limitations due to the “change in ownership” provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitations may result in the expiration of net operating losses and credits before utilization.
The Company has federal research and development tax credits of approximately $5.8 million, which will begin to expire in 2036 and California research and development tax credits of approximately $4.3 million which can be carried forward indefinitely. These tax credits are subject to the same limitations discussed above.
Unrecognized Tax Benefits
The Company adopted the provisions of ASC 740, which requires companies to determine whether it is “more likely than not” that a tax position will be sustained upon examination by the appropriate taxing authorities before any tax benefit can be recorded in the financial statements. It also provides guidance on the recognition, measurement, classification and interest and penalties related to uncertain tax positions.
The Company has the following activity relating to unrecognized tax benefits (in thousands):
Year Ended December 31,
20242023
Beginning balance
$3,480 $2,595 
Gross increases—Tax Positions in Prior Periods
— 429 
Gross decreases—Tax Positions in Prior Periods
(356)— 
Gross increases—Tax Positions in Current Period
445 456 
Ending balance
$3,569 $3,480 
As of December 31, 2024, the total amount of gross unrecognized tax benefits was $3.6 million, of which $0.1 million, if recognized, would impact the Company’s effective tax rate.
The Company files federal and state income tax returns. For U.S. federal and state income tax purposes, the statute of limitations currently remains open for the years ending December 31, 2021 to present and December 31, 2020 to present, respectively. In addition, all of the net operating losses and research and development credit carryforwards since inception that could be utilized in future years may be subject to examination. There are currently no pending income tax examinations.