Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

11. Income Taxes

The components of the pretax income (loss) are presented in the following table (in thousands):

	Year Ended December 31,
	2021			2020
U.S. Domestic	$	(127,943	)	$	(78,849	)
Foreign		(16,219	)		—
Net loss before taxes	$	(144,162	)	$	(78,849	)

The components of the provision for income taxes from continuing operations are presented in the following table (in thousands):

	Year Ended December 31,
	2021			2020
Current income tax provision:
Federal	$	123		$	—
State		166			100
Foreign		66			35
Total current		355			135
Deferred income tax provision:
Federal		(159	)		(2	)
State		(32	)		12
Total deferred		(191	)		10
Total income tax provision	$	164		$	145

The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to pretax loss from continuing operations as a result of the following differences:

	December 31,
	2021			2020
Federal statutory rate		21.00	%		21.00	%
Adjustments for tax effects of:
State taxes, net		(0.07	)		(0.11	)
Stock-based compensation		(0.48	)		(0.93	)
Foreign rate differential		0.43			0.00
Foreign taxes		(0.05	)		(0.04	)
Other permanent adjustments		0.08			(1.70	)
Federal uncertain tax positions		(0.08	)		0.00
Other		(0.13	)		(0.15	)
Valuation allowance		(20.81	)		(18.25	)
Effective income tax rate		(0.11	)%		(0.18	)%

Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2021 and 2020 are as follows (in thousands):

	December 31,
	2021			2020
Deferred tax assets:
Net operating losses	$	131,734		$	70,220
Interest		11,095			8,193
Inventory		8,784			8,117
Accruals and reserves		7,145			3,437
Lease liability		6,216			228
Stock-based compensation		4,318			2,464
Legal settlement		1,998			2,875
Income tax credit carryforwards		1,574			1,582
Total deferred tax assets		172,864			97,116
Valuation allowance		(127,209	)		(87,489	)
Total deferred tax assets, net of valuation allowance		45,655			9,627
Deferred tax liabilities:
Goodwill and intangibles		(18,439	)		(2,483	)
Property and equipment		(18,404	)		(6,803	)
Right-of-use assets		(6,256	)		(291	)
Total deferred tax liabilities		(43,099	)		(9,577	)
Net deferred tax assets	$	2,556		$	50

The realization of deferred tax assets is dependent on the Company’s ability to generate sufficient taxable income in future years in the associated jurisdiction to which the deferred tax assets relate. As of December 31, 2021, a valuation allowance of $127.2 million has been established against the deferred tax assets, as the Company has determined that it is currently not likely that these assets will be realized. During the year ended December 31, 2021, the valuation allowance increased by $39.7 million.

In determining the need for a valuation allowance, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance. Based on the review of all positive and negative evidence, including a three-year cumulative pretax loss, the Company determined that a full valuation allowance should be recorded against its deferred tax assets, with the exception of the Company’s Texas Temporary Credit for Business Loss Carryforwards and deferred tax assets in certain jurisdictions associated with EOS. There are no indefinite lived assets.

The following table summarizes the changes to unrecognized tax benefits (in thousands):

	Year ended December 31,
	2021		2020
Unrecognized tax benefit at the beginning of the year	$	2,452	$	2,452
Increases in tax positions for current year relating to    acquisitions		12,713		—
Unrecognized tax benefits at the end of the year	$	15,165	$	2,452

At December 31, 2021 and 2020, $14.5 million and $2.0 million, respectively, of the Company’s total unrecognized tax benefits, if recognized, would impact the effective income tax rate.

In accordance with the disclosure requirements as described in ASC Topic 740, Income Taxes, the Company classifies uncertain tax positions as non-current income tax liabilities unless they are expected to be paid within one year. The Company recognizes interest and penalties related to income tax matters as a component of the income tax provision. As of December 31, 2021, there were $0.2 million in accrued interest and penalties. There were no accrued interest and penalties as of December 31, 2020.

The Company and its subsidiaries are subject to federal income tax as well as income tax of multiple state and foreign jurisdictions. With few exceptions, the Company is no longer subject to income tax examination by tax authorities in major jurisdictions for years prior to 2016. However, to the extent allowed by law, the taxing authorities may have the right to examine prior periods where net operating losses and tax credits were generated and carried forward and make adjustments up to the amount of the carryforwards. The Company is not currently under examination by the Internal Revenue Service, foreign or state and local tax authorities.

At December 31, 2021, the Company had federal, state, and foreign net operating loss carryforwards of $448.8 million, $316.9 million and $122.4 million, respectively. Federal and state begin expiring at various dates beginning in 2022 through 2042, while foreign net operating losses in France carryforward indefinitely. Federal and some state net operating losses generated in years ending after December 31, 2017 can be carried forward indefinitely. At December 31, 2021, the Company had state research and development tax credit carryforwards of $3.2 million. The state research and development tax credits do not have an expiration date and may be carried forward indefinitely. Utilization of the net operating loss and tax credit carryforwards may become subject to annual limitations due to ownership change limitations that could occur in the future as provided by Section 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), as well as similar state provisions. These ownership changes may limit the amount of the net operating loss and tax credit carryforwards that can be utilized annually to offset future taxable income if the Company experiences a cumulative change in ownership of more than 50% within a three-year testing period.  The Company completed formal study through the year ended December 31, 2018 and determined ownership changes within the meaning of IRC Section 382 had occurred. The Company adjusted federal tax attribute carry forwards and deferred tax assets accordingly. The Company will make adjustments to the fully reserved attributes as further studies are completed.