Income Taxes

12 Months Ended

Dec. 31, 2021

Income Taxes

Income Taxes

21. Income Taxes

The components of loss before income taxes and the income tax benefit for the years ended December 31, 2021, 2020, and 2019, by jurisdiction, are as follows (in thousands):

	2021						2020						2019
	U.S.		Foreign		Total		U.S.		Foreign		Total		U.S.		Foreign		Total
Loss before income taxes	$	(466,825)	$	(9,337)	$	(476,162)	$	(624,302)	$	(2,698)	$	(627,000)	$	(82,188)	$	(1,555)	$	(83,743)
Income tax benefit		16,540		(343)		16,197		30,845		—		30,845		—		—		—
Net loss attributable to the Company	$	(450,285)	$	(9,680)	$	(459,965)	$	(593,457)	$	(2,698)	$	(596,155)	$	(82,188)	$	(1,555)	$	(83,743)

The significant components of deferred income tax expense (benefit) for the years ended December 31, 2021, 2020, and 2019, by jurisdiction, are as follows (in thousands):

	2021						2020						2019
	U.S.		Foreign		Total		U.S.		Foreign		Total		U.S.		Foreign		Total
Deferred tax (benefit) expense	$	(51,999)	$	1,064	$	(50,935)	$	(31,408)	$	(67)	$	(31,475)	$	(10,621)	$	(426)	$	(11,047)
Net operating loss carryforward generated		(105,498)		(2,038)		(107,536)		(51,849)		(438)		(52,287)		(5,099)		(270)		(5,369)
Valuation allowance increase (decrease)		140,957		1,317		142,274		52,412		505		52,917		15,720		696		16,416
Benefit for income taxes	$	(16,540)	$	343	$	(16,197)	$	(30,845)	$	—	$	(30,845)	$	—	$	—	$	—

The Company’s effective income tax rate differed from the federal statutory rate as follows:

	2021		2020		2019
U.S. Federal statutory tax rate	(21.00)	%	(21.00)	%	(21.00)	%
Deferred state taxes	(0.60)	%	(2.30)	%	1.36	%
Common stock warrant liability	(6.00)	%	13.40	%	0.0	%
Section 162M Disallowance	1.10	%	0.0	%	0.0	%
Equity Compensation	(4.30)	%	0.0	%	0.0	%
Provision to return and deferred tax asset adjustments	(1.30)	%	0.0	%	0.0	%
Change in U.S. Federal/Foreign statutory tax rate	0.30	%	0.0	%	0.0	%
Other, net	(1.50)	%	(3.50)	%	(0.48)	%
Change in valuation allowance	29.90	%	8.40	%	20.14	%
	(3.4)	%	(5.0)	%	0.0	%

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of certain assets and liabilities for financial reporting and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2021 and 2020 are as follows (in thousands):

	U.S.				Foreign				Total
	2021		2020		2021		2020		2021		2020
Intangible assets	$	—	$	—	$	—	$	1,197	$	—	$	1,197
Deferred revenue		24,514		16,082		146		192		24,660		16,274
Interest expense		29,095		21,183		—		—		29,095		21,183
Other reserves and accruals		23,398		5,087		7,332		—		30,730		5,087
Tax credit carryforwards		8,960		4,360		1,289		1,253		10,249		5,613
Amortization of stock-based compensation		13,904		3,900		—		—		13,904		3,900
Non-compensatory warrants		4,115		5,020		—		—		4,115		5,020
Capitalized research & development expenditures		37,912		30,870		4,613		4,483		42,525		35,353
Right of use liability (operating leases)		6,118		27,715		485		—		6,603		27,715
Net operating loss carryforwards		205,760		110,978		12,052		10,014		217,812		120,992
Total deferred tax asset		353,776		225,195		25,917		17,139		379,693		242,334
Valuation allowance		(295,424)		(154,467)		(18,444)		(17,127)		(313,868)		(171,594)
Net deferred tax assets	$	58,352	$	70,728	$	7,473	$	12		65,825	$	70,740
Intangible assets		(23,244)		(7,360)		(11,098)		—		(34,342)		(7,360)
Convertible debt		(27,346)		(27,420)		—		—		(27,346)		(27,420)
Right of use asset (operating leases)		(247)		(27,684)		(485)		—		(732)		(27,684)
Other reserves and accruals		—		—		—		(12)		—		(12)
Property, plant and equipment and right of use assets		(8,489)		(9,191)		—		—		(8,489)		(9,191)
Deferred tax liability	$	(59,326)	$	(71,655)	$	(11,583)	$	(12)	$	(70,909)	$	(71,667)
Net	$	(974)	$	(927)	$	(4,110)	$	—	$	(5,084)	$	(927)

The Company has recorded a valuation allowance, as a result of uncertainties related to the realization of its net deferred tax asset, at December 31, 2021 and 2020 of approximately $313.9 million and $171.6 million, respectively. A reconciliation of the current year change in valuation allowance is as follows (in thousands):

	U.S.		Foreign		Total
Increase in valuation allowance for current year increase in net operating losses	$	105,544	$	2,996	$	108,540
Increase in valuation allowance for current year net increase in deferred tax assets other than net operating losses		49,974		686		50,660
Increase in valuation allowance due to change in tax rates		(14,561)		(2,365)		(16,926)
Net increase in valuation allowance	$	140,957	$	1,317	$	142,274

With the exception of the Company’s Netherlands subsidiary, all deferred tax assets are offset by a full valuation allowance because it is more likely than not that the tax benefits of the net operating loss carryforwards and other deferred tax assets will not be realized.

Under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), the use of loss carryforwards may be limited if a change in ownership of a company occurs. If it is determined that due to transactions involving the Company’s shares owned by its 5 percent or greater stockholders a change of ownership has occurred under the provisions of Section 382 of the Code, the Company's federal and state NOL carryforwards could be subject to significant Section 382 limitations.

The Company's deferred tax assets include $905.6 million of U.S. net operating loss carryforwards. The NOL carryforwards available at December 31, 2021, include $736.5 million of NOL that was generated in 2018 through 2021, that do not expire. The remainder, if unused, will expire at various dates from 2034 through 2037. Based on analysis of stock transactions, an ownership change as defined under Section 382 of the Code occurred in 2013, which imposes a $13.5 million limit on the utilization of pre-change losses that can be used to offset taxable income in future years. The pre-change NOL carryforwards will expire, if unused, at various dates from 2021 through 2033. The Company continuously analyzes stock transactions and has determined that no ownership changes have occurred since 2013 that would further limit the utilization of NOLs. Therefore, NOLs of $892.1 million incurred in post-change years are not subject to limitation.

Approximately $9.0 million of research credit carryforwards generated after the most recent IRC Section 382 ownership change are included in the Company's deferred tax assets. Due to limitations under IRC Section 382, research credit carryforwards existing prior to the most recent IRC Section 382 ownership change will not be used and are not reflected in the Company's gross deferred tax asset at December 31, 2021. The remaining credit carryforwards will expire during the periods 2033 through 2041.

At December 31, 2021, the Company has unused Canadian net operating loss carryforwards of approximately $10.9 million. The net operating loss carryforwards if unused will expire at various dates from 2026 through 2034. At December 31, 2021, the Company has Scientific Research and Experimental Development (“SR&ED”) expenditures of $17.7 million available to offset future taxable income.  These SR&ED expenditures have no expiry date.  At December 31, 2021, the Company has Canadian ITC credit carryforwards of $1.3 million available to offset future income tax.  These credit carryforwards if unused will expire at various dates from 2022 through 2028.  

At December 31, 2021, the Company has unused French net operating loss carryforwards of approximately $29.6 million. The net operating loss may carryforward indefinitely or until the Company changes its activity.

At December 31, 2021, the Company has unused Netherlands net operating loss carryforwards of approximately $2.9 million, which can be carried forward 6 years to offset taxable income.

As of December 31, 2021, the Company has no un-repatriated foreign earnings or unrecognized tax benefits.

The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions.  In the normal course of business, the Company is subject to examination by taxing authorities. Open tax years in the U.S.

range from 2018 and forward. Open tax years in the foreign jurisdictions range from 2011 and forward.  However, upon examination in subsequent years, if net operating losses carryforwards and tax credit carryforwards are utilized, the US and foreign jurisdictions can reduce net operating loss carryforwards and tax credit carryforwards utilized in the year being examined if they do not agree with the carryforward amount. As of December 31, 2021, the Company was not under audit in the U.S. or non-U.S. taxing jurisdictions.

The Company recognized an income tax benefit for the year ended December 31, 2021, of $16.5 million as a result of the acquisition of Applied Cryo and related deferred tax liabilities recorded in acquisition accounting under ASC 805. The increase in deferred tax liabilities recorded to goodwill resulted in an offsetting release of valuation allowance against U.S. deferred tax assets, which is recognized as a component of income tax expense.  The Company has not changed its overall conclusion with respect to the need for a valuation allowance against its net deferred tax assets, which remain fully reserved, with the exception of $17.7 million of DTAs recorded in the Netherlands, which do not require a reserve as the Netherlands entity has approximately $21.8 million of DTLs that provide a sufficient source of income to support realization of its DTAs.