Note 11 - Income Taxes

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Income Tax Disclosure [Text Block]

11.         Income Taxes

The components for the income tax expense (benefit) are as follows for the years ended December 31 (in thousands):

	2020			2019
Current income taxes
Federal	$	—		$	—
State		—			—
Foreign		169			100
Deferred income taxes
Federal		—			—
State		—			—
Foreign		(1,685	)		(3,224	)
Total income tax expense (benefit)	$	(1,516	)	$	(3,124	)

The United States and foreign components of loss from operations before taxes are as follows for the years ended December 31 (in thousands):

	2020			2019
United States	$	(34,398	)	$	(91,935	)
Foreign		(26,430	)		(65,390	)
Total loss from operations before taxes	$	(60,828	)	$	(157,325	)

Significant components of the Company’s deferred tax assets consist of the following at December 31 (in thousands):

	2020			2019
Deferred tax assets:
Stock-based compensation	$	4,253		$	3,665
Accrued expenses and other		906			1,007
Research credit carryforward		7,209			6,776
Fixed assets		385			345
Capitalized start-up costs and other intangibles		2,686			3,618
Net operating loss carryforwards		122,193			113,410
		137,632			128,821
Valuation allowance		(132,928	)		(123,108	)
Net deferred tax asset		4,704			5,713
Deferred tax liabilities
Fixed assets and other		(1,590	)		(1,445	)
Purchase accounting intangibles		(2,807	)		(5,660	)
Net deferred tax liability		(4,397	)		(7,105	)
Net deferred tax asset (liability)	$	307		$	(1,392	)

At December 31, 2020 and 2019, the Company has provided a full valuation allowance against its net deferred assets in the U.S., Canada, Italy, Luxembourg, Swiss, and Taiwan tax jurisdictions, since realization of these benefits is not more likely than not. The valuation allowance increased approximately $9.8 million from the prior year. At December 31, 2020, the Company had U.S. federal net operating loss carryforwards of $364.3 million. Of this amount, $254.5 million begin to expire in 2027, while the remaining $109.8 million carry forward indefinitely. At December 31, 2020, the Company had U.S. state net operating loss carryforwards of $296.2 million. Of this amount, $289.3 million begin to expire in 2022, while the remaining $6.8 million carry forward indefinitely. At December 31, 2020, the Company had federal research credit carryforwards in the amount of $7.2 million. These carryforwards begin to expire in 2027. The utilization of the federal net operating loss carryforwards and credit carryforwards will depend on the Company’s ability to generate sufficient taxable income prior to the expiration of the carryforwards. In addition, the maximum annual use of net operating loss and research credit carryforwards is limited in certain situations where changes occur in stock ownership.

At December 31, 2020, the Company had foreign operating loss carryforwards in Italy of approximately $24.5 million, which can be carried forward indefinitely; foreign operating loss carryforwards in Luxembourg of approximately $95.1 million, which will begin to expire in 2035; and foreign operating loss carryforwards in Switzerland of approximately $61.9 million, which begin to expire in 2023.

The Company has evaluated its tax positions to consider whether it has any unrecognized tax benefits. As of December 31, 2020, the Company had gross unrecognized tax benefits of approximately $1.6 million. Of the total, none would reduce the Company’s effective tax rate if recognized. The Company does not anticipate a significant change in total unrecognized tax benefits or the Company’s effective tax rate due to the settlement of audits or the expiration of statutes of limitations within the next twelve months. Furthermore, the Company does not expect any cash settlement with the taxing authorities as a result of these unrecognized tax benefits as the Company has sufficient unutilized carryforward attributes to offset the tax impact of these adjustments.

The following is a tabular reconciliation of the Company’s change in gross unrecognized tax positions at December 31 (in thousands):

	2020		2019
Beginning balance	$	1,512	$	1,363
Gross increases for tax positions related to current periods		108		149
Gross increases for tax positions related to prior periods		—		—
Ending balance	$	1,620	$	1,512

The Company recognizes interest and penalties related to uncertain tax positions in the provision for income taxes. As of December 31, 2020 and 2019, the Company had no accrued interest or penalties related to uncertain tax positions.

The Company has analyzed its filing positions in all significant federal, state, and foreign jurisdictions where it is required to file income tax returns, as well as open tax years in these jurisdictions. With few exceptions, the Company is no longer subject to United States Federal, state, and local tax examinations by tax authorities for years before 2017, although carryforward attributes that were generated prior to 2017 may still be adjusted upon examination by the taxing authorities if they either have been or will be used in a future period. No income tax returns are currently under examination by taxing authorities.

Taxes computed at the then-current statutory federal income tax rate of 21% are reconciled to the provision for income taxes as follows for the years ended December 31:

	2020						2019
				Percent of Pretax						Percent of Pretax
	Amount			Earnings			Amount			Earnings
United States federal tax at statutory rate	$	(12,774	)		21.0	%	$	(33,038	)		21.0	%
State taxes (net of deferred benefit)		(1,768	)		2.9	%		(4,778	)		3.0	%
Nondeductible expenses		719			(1.2	%)		709			(0.5	%)
Change in fair market value of contingent consideration		717			(1.2	%)		(2,342	)		1.5	%
Warrant remeasurement and financing costs		82			(0.1	%)		(551	)		0.4	%
Research & Development credits		(542	)		0.9	%		(743	)		0.5	%
Change in unrecognized tax benefits		108			(0.2	%)		149			(0.1	%)
Foreign tax rate differential		1,589			(2.6	%)		2,590			(1.6	%)
Goodwill and investment impairments		—			(0	%)		(6,638	)		4.2	%
Change in enacted tax rates and other, net		533			(0.9	%)		(253	)		0.2	%
Change in valuation allowance		9,820			(16.1	%)		41,771			(26.6	%)
Income tax benefit	$	(1,516	)		2.5	%	$	(3,124	)		2.0	%

The Company has analyzed its filing positions in all significant federal, state, and foreign jurisdictions where it is required to file income tax returns, as well as open tax years in these jurisdictions. Pursuant to the Internal Revenue Code, as amended (the “Code”) Sections 382 and 383, annual use of a company’s NOL and research and development credit carryforwards may be limited if there is a cumulative change in ownership of greater than 50% within a three-year period. The amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years.  The Company has not completed such an analysis pursuant to Sections 382 and 383.  Due to the existence of the valuation allowance, further changes in the Company’s unrecognized tax benefits will not impact the Company’s effective tax rate. With few exceptions, the Company is no longer subject to United States Federal, state, and local tax examinations by tax authorities for years before 2017, although carryforward attributes that were generated prior to 2017 may still be adjusted upon examination by the taxing authorities if they either have been or will be used in a future period. No income tax returns are currently under examination by taxing authorities.