Income Taxes

12 Months Ended

Dec. 31, 2019

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



	2019			2018
Current income taxes
Federal	$	—		$	—
State	—			—
Foreign	100			—
Deferred income taxes
Federal	—			—
State	—			—
Foreign	(3,224		)	(3,377		)
Total income tax benefit	$	(3,124	)	$	(3,377	)

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



	2019			2018
United States	$	(91,935	)	$	(44,744	)
Foreign	(65,390		)	(20,410		)
Total loss from operations before taxes	$	(157,325	)	$	(65,154	)

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



	2019			2018
Noncurrent deferred tax assets:
Stock-based compensation	$	3,665		$	2,281
Accrued expenses and other	1,007			795
Research credit carryforward	6,776			6,182
Fixed assets	345			392
Capitalized start-up costs and other intangibles	3,618			1,859
Net operating loss carryforwards	113,410			74,566
	128,821			86,075
Valuation allowance	(123,108)			(81,337		)
Net noncurrent deferred tax asset	5,713			4,738
Noncurrent deferred tax liabilities
Fixed assets and other	(1,445		)	(686		)
Purchase accounting intangibles	(5,660		)	(8,772		)
Net noncurrent deferred tax liability	(7,105		)	(9,458		)
Net deferred tax liability	$	(1,392	)	$	(4,720	)

At December 31, 2019 and 2018, the Company has provided a full valuation allowance against its net deferred tax assets in the U.S., Luxembourg, Swiss, and Asian tax jurisdictions, since realization of these benefits is not more likely than not. The valuation allowance increased approximately $41.8 million from the prior year. At December 31, 2019, the Company had U.S. federal net operating loss carryforwards of $337.6 million. Of this amount, $254.5 million begin to expire in 2027, while the remaining $83.1 million carry forward indefinitely. At December 31, 2019, the Company had U.S. state net operating loss carryforwards of $287.5 million. Of this amount, $282.8 million begin to expire in 2022, while the remaining $4.7 million carry forward indefinitely. At December 31, 2019, the Company had federal research credit carryforwards in the amount of $6.8 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, 2019, the Company had foreign operating loss carryforwards in Italy of approximately $23.1 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; foreign operating loss carryforwards in Switzerland of approximately $42.3 million, which begin to expire in 2023; and foreign operating loss carryforwards in Japan of approximately $2.0 million, which begin to expire in 2028.

The Company has evaluated its tax positions to consider whether it has any unrecognized tax benefits. As of December 31, 2019, the Company had gross unrecognized tax benefits of approximately $1.5 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):



	2019		2018
Beginning balance	$	1,363	$	1,202
Gross increases for tax positions related to current periods	149		161
Gross increases for tax positions related to prior periods	—		—
Ending balance	$	1,512	$	1,363

The Company recognizes interest and penalties related to uncertain tax positions in the provision for income taxes. As of December 31, 2019 and 2018, 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 2016, although carryforward attributes that were generated prior to 2016 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:



	2019					2018
	Amount			% of Pretax Earnings		Amount			% of Pretax Earnings
United States federal tax at statutory rate	$	(33,038	)	21.0	%	$	(13,682	)	21.0	%
State taxes (net of deferred benefit)	(4,778		)	3.0	%	(1,080		)	1.7	%
Nondeductible expenses	709			(0.5	)%	(1,320		)	2.0	%
Change in fair market value of contingent consideration	(2,342		)	1.5	%	(256		)	0.4	%
Warrant remeasurement and financing costs	(551		)	0.4	%	3,630			(5.6	)%
Research & Development credits	(743		)	0.5	%	(803		)	1.2	%
Change in unrecognized tax benefits	149			(0.1	)%	161			(0.2	)%
Foreign tax rate differential	2,590			(1.6	)%	(96		)	0.1	%
Goodwill impairment	(6,638		)	4.2	%	—			—
Change in enacted tax rates and other, net	(253		)	0.2	%	252			(0.3	)%
Change in valuation allowance	41,771			(26.6	)%	9,817			(15.1	)%
Income tax benefit	$	(3,124	)	2.0	%	$	(3,377	)	5.2	%

U.S. shareholders are subject to tax on global intangible low-taxed income (GILTI) earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. The Company has elected to account for GILTI in the year the tax is incurred. As of December 31, 2019, no GILTI tax has been recorded.

In a referendum held on May, 19 2019, Swiss voters adopted the Federal Act on Tax Reform and AVS Financing (TRAF). TRAF introduces major changes in the Swiss tax system by abolishing certain current preferential tax regimes and replacing them with new measures that are in line with international standards. The referendum did not have a material impact on the Company’s 2019 tax provision. The Company will continue to evaluate the impact of these provisions in future periods as the enactment process in completed.