Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

16. Income Taxes

Loss before income taxes was as follows (in thousands):

	Years ended December 31,
	2021			2020
Domestic	$	(59,702	)	$	(68,636	)
Foreign		(41,142	)		(14,989	)
Loss before income tax (expense) benefit	$	(100,844	)	$	(83,625	)

The federal, state, and foreign income tax (expense) benefit consists of the following:

	Years ended December 31,
	2021			2020
Current:
U.S. – Federal	$	—		$	—
U.S. – State	—				—
Foreign	—			—
Total current		—			—
Deferred:
U.S. – Federal		(1,690	)		1,607
U.S. – State		98			234
Foreign		(501	)		162
Total deferred		(2,093	)		2,003
Total income tax (expense) benefit	$	(2,093	)	$	2,003

The effective tax rate of the provision for income taxes differed from the federal statutory rate as follows:

	Years ended December 31,
	2021			2020
Federal tax benefit at statutory rate		21.0	%		21.0	%
State taxes, net of federal benefit		1.1	%		0.2	%
Change in valuation allowance		(13.8	%)		(12.0	%)
Foreign rate differential		(4.4	%)		1.0	%
Redeemable convertible preferred stock tranche liability		0.0	%		(7.0	%)
U.S. impact of foreign operations		(4.5	%)		0.0	%
Other		(1.5	%)		(0.9	%)
Effective income tax rate		(2.1	%)		2.3	%

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant components of deferred tax assets and liabilities consisted of the following (in thousands):

	December 31,
	2021			2020
Deferred tax assets:
Net operating loss carryforwards	$	53,923		$	16,781
Accruals and reserves		1,350			928
Contingent payments		3,350		—
Stock-based compensation expense		2,821			2,134
Business tax credits		2,450			1,372
Other		2,523		—
Lease liabilities		9,824			10,010
Gross deferred tax assets		76,241			31,225
Valuation allowance		(59,762	)		(15,017	)
Total deferred tax assets, net of valuation allowance		16,479			16,208
Deferred tax liabilities:
Fixed asset basis		(2,142	)		(2,541	)
Right of use asset		(12,299	)		(13,318	)
Intangible asset basis		(2,773	)		(16,726	)
Total deferred tax liabilities		(17,214	)		(32,585	)
Net deferred tax assets and liabilities	$	(735	)	$	(16,377	)

We are required to reduce our deferred tax assets by a valuation allowance if it is more likely than not that some or all of our deferred tax assets will not be realized. We must use judgment in assessing the potential need for a valuation allowance, which requires an evaluation of both negative and positive evidence. The weight given to the potential effect of negative and positive evidence should be commensurate with the extent to which it can be objectively verified. In determining the need for and amount of the valuation allowance, if any, we assess the likelihood that we will be able to recover our deferred tax assets using historical levels of income, estimates of future income and tax planning strategies. As a result of historical consolidated cumulative losses, we determined that, based on all available evidence, there was substantial uncertainty as to whether we would recover a majority of our recorded net deferred taxes in future periods. As a result, we recorded a valuation allowance against the U.S. net deferred tax assets at December 31, 2021 and 2020. The valuation allowance increased by $44.7 million and $10.0 million during the years ended December 31, 2021 and 2020, respectively.

At December 31, 2021, we have generated net operating loss (“NOL”) carryforwards (before tax effects) for federal, state and foreign income tax purposes of $186.2 million, $80.4 million and $29.6 million, respectively. The federal, state and foreign NOL carryforwards will begin to expire in 2029, 2039 and 2039, respectively, if not utilized. In addition, we have foreign business tax credits of $2.4 million to offset future income tax liabilities, which will start to expire in 2039, if not utilized.

Our ability to utilize NOL carryforwards or other tax attributes, such as research tax credits, in any taxable year may be limited if we have experienced an ownership change under Section 382 of the Internal Revenue Code (the Code) of 1986, as amended. The Merger resulted in such an ownership change and, accordingly, our NOL carryforwards and certain other tax attributes will be subject to further limitations on their use. We assessed whether we had an ownership change, as defined by Section 382 of the Code from our formation through December 31, 2021. Based upon this assessment, we experienced an ownership change on October 5, 2020. Due to these ownership changes, reductions were made to our NOL and tax credit carryforwards under these rules. Additional ownership changes in the future could result in additional limitations on our NOL and tax credit carryforwards.

Uncertain Tax Positions

We account for uncertainty in income taxes in accordance with ASC Topic 740. Tax positions are evaluated in a two-step process, whereby we first determine whether it is more likely than not that a tax position will be sustained upon examination by the tax authority, including resolutions of any related appeals or litigation processes, based on technical merit. If a tax position meets the more-likely-than-not recognition threshold, it is then measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement.

The following table summarizes the activity related to our unrecognized benefits (in thousands):

	Year Ended December 31,
	2021			2020
Balance at beginning of year	$	753		$	753
Additions based on tax positions related to prior year		—			—
Reductions based on tax positions related to prior year		(753	)		—
Additions based on tax positions related to current year		—			—
Reductions based on tax positions related to current year		—			—
Balance at end of year	$	—		$	753

Our policy is to classify interest and penalties associated with unrecognized tax benefits as income tax expense. We had no interest or penalty accruals associated with uncertain tax benefits in our consolidated balance sheets and consolidated statement of operations and comprehensive loss for the year ended December 31, 2021. We do not have any tax positions for which it is reasonably possible that the total amount of gross unrecognized tax benefits will significantly change within 12 months of December 31, 2021.

We file federal, state and foreign income tax returns in jurisdictions with varying statutes of limitations. Due to our net operating loss carryforwards, our income tax returns remain subject to examination by federal, state and foreign tax authorities for all tax years.