Income Taxes

12 Months Ended

Dec. 31, 2020

Income Taxes

Income Taxes

21. Income Taxes, as restated

The components of loss before income taxes and the income tax benefit for the years ended December 31, 2020, 2019, and 2018, by jurisdiction, are as follows (in thousands):

							2019						2018
	2020						(as restated)						(as restated)
	U.S.		Foreign		Total		U.S.		Foreign		Total		U.S.		Foreign		Total
Loss before income taxes	$	(624,302)	$	(2,698)	$	(627,000)	$	(82,188)	$	(1,555)	$	(83,743)	$	(93,497)	$	(1,407)	$	(94,903)
Income tax benefit		30,845		—		30,845		—		—		—		9,295		—		9,295
Net loss attributable to the Company	$	(593,457)	$	(2,698)	$	(596,155)	$	(82,188)	$	(1,555)	$	(83,743)	$	(84,201)	$	(1,407)	$	(85,608)

The significant components of deferred income tax expense (benefit) for the years ended December 31, 2020, 2019, and 2018, by jurisdiction, are as follows (in thousands):

							2019						2018
	2020						(as restated)						(as restated)
	U.S.		Foreign		Total		U.S.		Foreign		Total		U.S.		Foreign		Total
Deferred tax (benefit) expense	$	(31,408)	$	(67)	$	(31,475)	$	(10,621)	$	(426)	$	(11,047)	$	(11,745)	$	933	$	(10,812)
Net operating loss carryforward generated		(51,849)		(438)		(52,287)		(5,099)		(270)		(5,369)		(10,321)		(665)		(10,986)
Valuation allowance increase (decrease)		52,412		505		52,917		15,720		696		16,416		12,771		(268)		12,503
Benefit for income taxes	$	(30,845)	$	—	$	(30,845)	$	—	$	—	$	—	$	(9,295)	$	—	$	(9,295)

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

	2020		2019		2018
U.S. Federal statutory tax rate	(21.0)	%	(21.0)	%	(21.0)	%
Deferred state taxes	(2.3)	%	1.4	%	(1.9)	%
Common stock warrant liability	13.4	%	—	%	(1.0)	%
Other, net	(3.4)	%	(0.5)	%	0.9	%
Change in valuation allowance	8.4	%	20.1	%	13.2	%
	(4.9)	%	0.0	%	(9.8)	%

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, 2020 and 2019 are as follows (in thousands):

	U.S.				Foreign				Total
			2019				2019				2019
	2020		(as restated)		2020		(as restated)		2020		(as restated)
Intangible assets	$	—	$	—	$	1,197	$	1,197	$	1,197	$	1,197
Deferred revenue		16,082		7,922		192		129		16,274		8,051
Interest expense		21,183		10,216		—		—		21,183		10,216
Other reserves and accruals		5,087		1,504		—		—		5,087		1,504
Tax credit carryforwards		4,360		2,590		1,253		1,253		5,613		3,843
Amortization of stock-based compensation		3,900		9,081		—		—		3,900		9,081
Non-compensatory warrants		5,020		4,322		—		—		5,020		4,322
Capitalized research & development expenditures		30,870		22,601		4,483		4,483		35,353		27,084
Right of use liability (operating leases)		27,715		22,647		—		—		27,715		22,647
Net operating loss carryforwards		110,978		54,438		10,014		9,576		120,992		64,014
Total deferred tax asset		225,195		135,321		17,139		16,638		242,334		151,959
Valuation allowance		(154,467)		(102,055)		(17,127)		(16,622)		(171,594)		(118,677)
Net deferred tax assets	$	70,728	$	33,266	$	12	$	16	$	70,740	$	33,282
Intangible assets		(7,360)		(15)		—		—		(7,360)		(15)
Convertible debt		(27,420)		(6,592)		—		—		(27,420)		(6,592)
Right of use asset (operating leases)		(27,684)		(23,040)		—		—		(27,684)		(23,040)
Other reserves and accruals		—		—		(12)		(16)		(12)		(16)
Property, plant and equipment and right of use assets		(9,191)		(3,619)		—		—		(9,191)		(3,619)
Deferred tax liability	$	(71,655)	$	(33,266)	$	(12)	$	(16)	$	(71,667)	$	(33,282)
Net	$	(927)	$	—	$	—	$	—	$	(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, 2020 and 2019 of approximately $171.6 million and $118.7 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	$	51,848	$		$	51,848
Increase (decrease) in valuation allowance for current year net increase (decrease) in deferred tax assets other than net operating losses		(5,742)		133		(5,609)
Decrease in valuation allowance as a result of foreign currency fluctuation		6,306		—		6,306
Increase in valuation allowance due to change in tax rates		—		372		372
Net increase in valuation allowance	$	52,412	$	505	$	52,917

The deferred tax assets have been 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 may not be realized due to cumulative losses.

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.

Based on studies of the changes in ownership of the Company, it has been determined that an ownership change under Section 382 of the Code occurred in 2013 that limited the amount of pre-change NOL that can be used in future years to $13.5 million. These NOL carryforwards will expire, if unused, at various dates from 2020 through 2033. NOLs of $450.9 million incurred after the most recent ownership change are not subject to Section 382 of the Code and are available for use in future years. Accordingly, the Company’s deferred tax assets include $464.4 million of U.S. net operating loss carryforwards. The NOL carryforwards available at December 31, 2020, include $205.2 million of NOL that was generated in 2020, $25.0 million of net operating loss that was generated in 2019 and $43.4 million of NOL that was generated in 2018 that do not expire (2019 and 2018 as restated). The remainder, if unused, will expire at various dates from 2032 through 2037.

Approximately $4.4 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, 2020. The remaining credit carryforwards will expire during the periods 2033 through 2040.

At December 31, 2020, the Company has unused Canadian net operating loss carryforwards of approximately $14.0 million. The net operating loss carryforwards if unused will expire at various dates from 2026 through 2034. At December 31, 2020, the Company has Scientific Research and Experimental Development (“SR&ED”) expenditures of $17.2 million available to offset future taxable income. These SR&ED expenditures have no expiry date. At December 31, 2020, 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, 2020, the Company has unused French net operating loss carryforwards of approximately $21.3 million. The net operating loss may carryforward indefinitely or until the Company changes its activity.

As of December 31, 2020, 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 US range from 2017 and forward. Open tax years in the foreign jurisdictions range from 2010 to 2019. 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, 2020, 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, 2020 of $30.8 million resulting from a source of future taxable income attributable to the net credit to additional paid-in capital of $25.6 million related to the issuance of the 3.75% Convertible Senior Notes, offset by the partial extinguishment of the 5.5% Convertible Senior Notes and $5.2 million of income tax benefit for the year ended December 31, 2020 related to the recognition of net deferred tax liabilities in connection with the Giner ELX acquisition. This resulted in a corresponding reduction in our deferred tax asset valuation allowance. 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.