Income Taxes

12 Months Ended

Dec. 31, 2019

The components of the Company’s loss before income tax provision for the years ended December 31, 2019, 2018 and 2017 are as follows:


	Years Ended December 31,
	2019		2018		2017
Loss from continuing operations before income taxes:
Domestic	$	(10,513)	$	(9,034)	$	(18,147)
Foreign	1,982		(206)		(1,900)
Total loss from continuing operations before income taxes	$	(8,531)	$	(9,240)	$	(20,047)

The Company’s income tax provision, which is comprised of minimum U.S. federal, state and local taxes and taxes from foreign jurisdictions, consists of the following:


	Years Ended December 31,
	2019		2018		2017
Provision for current income taxes:
U.S. federal	$	—	$	10	$	—
U.S. state and local	(26)		91		(2)
Foreign	556		97		154
Total provision for current income taxes	530		198		152
Benefit for deferred income taxes:
U.S. federal	—		(10)		(332)
U.S. state and local	—		—		—
Foreign	(54)		(198)		(167)
Total benefit for deferred income taxes	(54)		(208)		(499)
Total (benefit) provision for income taxes	$	476	$	(10)	$	(347)

A reconciliation between the U.S. federal statutory income tax rate to the effective tax rate, by applying such rates to loss before income tax provision, for the years ended December 31, 2019, 2018 and 2017 are as follows:


	Years Ended December 31,
	2019		2018		2017
U.S. federal statutory income tax rate	(21.00)	%	(21.00)	%	(34.00)	%
State income tax rate, net of U.S. federal tax benefit	(0.25)		0.77		(0.01)
Stock-based compensation expense	(11.36)		(6.45)		—
Acquisition related costs	—		—		3.11

Mark-to-market expense	—		—		0.25
Change in income tax rates	2.40		(6.33)		(1.03)
Change in deferred tax asset valuation	31.32		34.08		29.03
Trademark income	—		(1.54)		—
GILTI	3.55	%	—		—

Goodwill impairment charge	—		—		1.46
AMT credit	—		—		(1.65)
Meals and Entertainment	0.89		0.55		1.10

Other	0.03		(0.20)		0.01
Effective tax rate	5.58	%	(0.12)	%	(1.73)	%

Significant components of the Company’s deferred tax assets and liabilities reported on a net cross jurisdictional basis are summarized as follows:


	December 31,
	2019		2018
Deferred tax assets:
Net operating losses and tax credits	$	29,514	$	29,322
Stock-based compensation expense	4,028		4,118
Deferred rent	—		1,049
Depreciation and amortization expense	275		1,585
Accrued expenses	831		583
ROU liability	7,656		—
Transaction costs	467		—


Allowance for doubtful accounts	339		283
Unrealized gains and losses	165		51
Total deferred tax assets before valuation allowance	43,275		36,991
Less: valuation allowance	(36,877)		(36,692)
Total deferred tax assets, net of valuation allowance	6,398		299

Deferred tax liabilities:
Intangible assets	(993)		(1,243)
Unrealized gains and losses	(135)		(16)
Depreciation Expense	(90)
ROU asset	(6,126)		—

Total deferred tax liabilities	(7,344)		(1,259)

Total deferred tax liabilities, net	$	(946)	$	(960)

For financial and tax reporting purposes, the Company incurred net operating losses in each period since its inception, except for 2017 and, therefore, a significant portion of the deferred tax assets recognized relate to such net operating losses. In determining whether the Company may realize the benefits from these deferred tax assets, the Company considers all available objective and subjective evidence, both positive and negative. Based on the available objective and subjective evidence, including the Company’s history of net operating losses, management believes it is more likely than not that the deferred tax assets will not be fully realizable at December 31, 2019 and 2018. Accordingly, the Company provided a valuation allowance on substantially all of its deferred tax asset balance to reflect the uncertainty regarding the realizability of these assets for the periods presented, with the exception of a deferred tax asset related to AMT tax credits.

On December 22, 2017, the U.S. President signed the Tax Cuts and Jobs Act (the “Act”) into law. Effective January 1, 2018, among other changes, the Act (1) reduces the U.S. federal corporate tax rate from 35 percent to 21 percent, (2) changes the rules relating to net operating loss ("NOL") carryforwards and carrybacks, (3) eliminates the corporate alternative minimum tax ("AMT") and changes how existing AMT credits can be realized; and (4) numerous modifications creating a territorial tax system and broadening the income tax base. The impact on the Company's financial statements for the period ended December 31, 2018 is immaterial, primarily because the Company has a valuation allowance on deferred tax assets in the U.S. In addition, the Act makes the AMT credit refundable in tax years beginning after 2017. As a result of this change, the Company does not have a valuation allowance on its AMT credit. The impact on the Company's financial statements for the period ended December 31, 2019 is immaterial, primarily because the Company has a valuation allowance on deferred tax assets in the U.S. In addition, the Act makes the AMT credit refundable in tax years beginning after 2017. As a result of this change, the Company does not have a valuation allowance on its AMT credit.

As a result of U.S. tax reform legislation, distributions of profits from non-U.S. subsidiaries are not expected to cause a significant incremental U.S. tax impact in the future. However, distributions may be subject to non-U.S. withholding taxes if profits are distributed from certain jurisdictions. U.S. federal income taxes have not been provided on undistributed earnings of our international subsidiaries as it is our intention to reinvest any earnings into the respective subsidiaries. It is not practicable to estimate the amount of tax that might be payable if some or all of such earnings were to be repatriated due to the legal structure and complexity of U.S. and local tax laws.

For the year ended December 31, 2019, the Company’s valuation allowance has increased to $36,877 compared to $36,692 as of December 31, 2018, largely due to the increase in deferred tax assets for net operating losses, ROU liability and transaction costs. These increases were partially offset by a reduction to net operating losses that are expected to expire unutilized.

As of December 31, 2019, the Company has U.S. federal and state net operating loss carry-forwards of approximately $107,982 and $74,992, respectively, and foreign net operating loss carry-forwards of $6,787, $5,901, and $98 related to its international subsidiaries in the Germany, United Kingdom and Australia respectively, which are available to reduce future taxable income in those jurisdictions. The U.S. federal net operating losses will expire in various years beginning in 2027 through 2036. Post-Act federal net operating losses will not expire. The Company’s foreign net operating loss carry-forwards can be carried forward without limitation in each respective country. The U.S. federal net operating losses includes acquired tax loss carry-forwards of Transpera, Inc. (“Transpera”) and ScanScout, Inc. (“ScanScout”), and net operating losses from Telaria, Inc. ("Telaria") which experienced an ownership change in 2010 which are subject to limitation on future utilization under Section 382 of the Internal Revenue Code of 1986 (“Section 382”). Section 382 imposes limitations on the availability of a company’s net operating losses after a more than 50 percentage point ownership change occurs. It is estimated that the effect of Section 382 will generally limit the amount of the net operating loss carry-forwards of Transpera, that are available to offset future taxable income to approximately $161, annually.

As a result of the adoption of ASU 2016-09, the Company no longer excludes tax benefits that arose directly from equity compensation in excess of compensation recognized for financial reporting in its U.S. federal and state net operating loss carryforwards.

The Company did not record any amounts related to uncertain tax positions or tax contingencies at December 31, 2019 and 2018. As of December 31, 2019 and 2018, the primary tax jurisdictions in which the Company is subject to tax were the U.S. federal and state jurisdictions, Australia, Canada, France, Singapore, Malaysia, New Zealand, Brazil and United Kingdom. Since the Company is in an overall net operating loss position, the Company is generally subject to U.S. federal and state income tax examinations by tax authorities for all years for which a net operating loss carry-forward is available. The

Company’s open tax years extend back to 2005. In the event that the Company concludes that it is subject to interest or penalties arising from uncertain tax positions, the Company will record interest and penalties as a component of provision for income taxes. No amounts of interest or penalties were recognized in the consolidated statements of operations for the years ended December 31, 2019, 2018 and 2017. The year ended December 31, 2017 is currently under the IRS examination.