Note 11 - Income Taxes

12 Months Ended

Dec. 31, 2021

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):

	2021			2020			2019
Current income taxes
Federal	$	-		$	-		$	-
State		-			-			-
Foreign		232			169			100
Deferred income taxes
Federal		-			-			-
State		-			-			-
Foreign		(7	)		(1,685	)		(3,224	)
Total income tax expense (benefit)	$	225		$	(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):

	2021			2020			2019
United States	$	(32,094	)	$	(34,398	)	$	(91,935	)
Foreign		(30,143	)		(26,430	)		(65,390	)
Total loss from operations before taxes	$	(62,237	)	$	(60,828	)	$	(157,325	)

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

	2021			2020
Deferred Tax assets:
Stock-based compensation	$	2,440		$	4,253
Accrued expenses and other		2,423			906
Research credit carryforward		564			-
Fixed Assets		101			385
Capitalized start-up costs and other intangibles		1,109			2,686
Net operating loss carryforwards		75,237			63,786
		81,874			72,016
Valuation Allowance		(78,294	)		(67,312	)
Net deferred tax asset		3,580			4,704
Deferred tax liabilities
Fixed assets and other		(1,176	)		(1,590	)
Purchase accounting intangibles		(2,116	)		(2,807	)
Net deferred tax liability		(3,292	)		(4,397	)
Net deferred tax asset (liability)	$	288		$	307

During the current year, the Company completed an assessment of the available net operating loss and tax credit carryforwards under Section 382 and Section 383 of the Internal Revenue Code, respectively. The Company determined that it underwent multiple ownership changes throughout its history as defined under Section 382, including most recently in 2020. As a result of the identified ownership changes, the portion of net operating loss and tax credits carryforwards attributable to the pre-ownership change periods are subject to a substantial annual limitation under Sections 382 and 383 of the Internal Revenue Code. The Company has adjusted its net operating loss and tax credit carryforwards to address the impact of the 382 ownership changes. This resulted in a reduction of available Federal and State NOLs of $253 million and $204 million, respectively. The write down of the NOLs reduced the net operating loss carryforward line as previously disclosed for the year ended December 31, 2020 by $58.4 million, with a corresponding decrease in the valuation allowance. The Company also reduced its research credit carryforwards for the year ended December 31, 2020 by $7.2 million with a corresponding decrease in the valuation allowance. The $7.2 million reduction was net of the related unrecognized tax benefit in the amount of $1.6 million.

Since the limitation affected the prior period, the Company has determined that its December 31, 2020 tax footnote presentation overstated the gross deferred tax asset and corresponding valuation allowance by $65.6 million. However, there was no net impact to the net deferred tax asset and tax expense as the decrease in the net operating loss carryforward was offset completely by a corresponding adjustment to the Company’s overall valuation allowance. For comparative purposes, the Company’s prior year tax footnote has been revised to reflect the adjustment to the net operating losses and valuation allowance. The change had no effect on the previously reported balance sheets, statements of operations and comprehensive loss, cash flows and stockholders’ equity.

At December 31, 2021 and 2020, the Company has provided a full valuation allowance against its net deferred assets in the U.S., Canada, Italy, Luxembourg, Switzerland, and Taiwan tax jurisdictions, since realization of these benefits is not more likely than not. The valuation allowance increased approximately $11.0 million from the prior year. At December 31, 2021, the Company had U.S. federal net operating loss carryforwards of $397.2 million, of which $253 million are expected to expire unused under the limitations imposed by Internal Revenue Code Section 382 (as discussed above). Of the total amount of Federal NOLs (notwithstanding the 382 limitation), $254.5 million begin to expire in 2027, while the remaining $142.7 million carry forward indefinitely. At December 31, 2021, the Company had U.S. state net operating loss carryforwards of $309.2 million, of which $204 million are expected to expire unused under the state tax law equivalents of Internal Revenue Code Section 382. Of this amount (notwithstanding the 382 limitations), $299.9 million of state NOLs begin to expire in 2022, while the remaining $9.3 million carry forward indefinitely. At December 31, 2021, the Company had federal research credit carryforwards in the amount of $9.4 million. These carryforwards begin to expire in 2027.  However, under the limitations of Internal Revenue Code Section 383, it is expected that $8.8 million of this carryforward will expire unused. 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.

At December 31, 2021, the Company had foreign operating loss carryforwards in Italy of approximately $25.2 million, which can be carried forward indefinitely; foreign operating loss carryforwards in Luxembourg of approximately $96.6 million, which will begin to expire in 2034; foreign operating loss carryforwards in Switzerland of approximately $90.6 million, which begin to expire in 2023, and foreign operating loss carryforwards in Canada of approximately $0.5 million, which begin to expire in 2040.

The Company has evaluated its tax positions to consider whether it has any unrecognized tax benefits. As of December 31, 2021, the Company had gross unrecognized tax benefits of approximately $0.1 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.

Note that the Company removed $1.6 million of the unrecognized tax benefits associated with R&D credit carryforwards that it expects to expire unused due to Section 383 limitations. This  adjustment is reflected in the table below as of December 31, 2020.

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

	2021		2020			2019
Beginning balance	$	-	$	1,512		$	1,363
Gross increases for tax positions related to current periods		141		108			149
Gross decreases related to 382 limitations		-		(1,620	)		-
Ending balance	$	141	$	-		$	1,512

The Company recognizes interest and penalties related to uncertain tax positions in the provision for income taxes. As of December 31, 2021 and 2020, 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 2018, although carryforward attributes that were generated prior to 2018 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:

	2021						2020						2019
	Amount			Percent of Pretax Earnings			Amount			Percent of Pretax Earnings			Amount			Percent of Pretax Earnings
United States federal tax at statutory rate	$	(13,070	)		21.0	%	$	(12,774	)		21.0	%	$	(33,038	)		21.0	%
State taxes (net of deferred benefit)		(2,205	)		3.5	%		(1,768	)		2.9	%		(4,778	)		3.0	%
Nondeductible expenses		(440	)		0.7	%		719			(1.2	%)		709			(0.5	%)
Change in fair market value of contingent consideration		(397	)		0.6	%		717			(1.2	%)		(2,342	)		1.5	%
Warrant remeasurment and financing costs		502			(0.8	%)		82			(0.1	%)		(551	)		0.4	%
Research & Development		(705	)		1.1	%		(542	)		0.9	%		(743	)		0.5	%
Change in unrecognized tax benefits		141			(0.2	%)		(1,512	)		2.5	%		149			(0.1	%)
Foreign tax rate differential		1,911			(3.1	%)		1,589			-2.6	%		2,590			(1.6	%)
Goodwill and investment impairments		-			-			-			-			(6,638	)		4.2	%
Adjustment for 382 Limitations		-			-			67,255			(110.6	%)		-			0.0	%
True-up to Stock Compensation - Cancellations		2,832			(4.6	%)		-			-			-			0.0	%
Change in enacted tax rates and other, net		731			(1.0	%)		533			(0.9	%)		(253	)		0.2	%
Change in valuation allowance		10,925			(17.6	%)		(55,815	)		91.8	%		41,771			26.6	%
Income tax expense (benefit)	$	225			(0.4	%)	$	(1,516	)		2.5	%	$	(3,124	)		2.0	%