Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

13. INCOME TAXES

Loss before provision for income taxes consisted of the following for the periods indicated (in thousands):

	December 31, 2019			December 31, 2020			December 31, 2021
Domestic	$	(58,718	)	$	(62,985	)	$	(233,846	)
International		(42	)		(93	)		(1,646	)
Total	$	(58,760	)	$	(63,078	)	$	(235,492	)

The components of the Company’s income tax provision were as follows for the periods indicated (in thousands):

	December 31, 2019		December 31, 2020		December 31, 2021
Current:
Federal	$	—	$	—	$	—
State		21		28		72
Foreign		8		0		265
Total current		29		28		337
Deferred:
Federal		—		—		253
State		—		20		32
Foreign		—		—		(90	)
Total deferred		—		20		195
Income tax provision	$	29	$	48	$	532

The reconciliation of the Federal statutory income tax provision to the Company’s effective income tax provision is as follows for the periods indicated (in thousands):

	December 31, 2019			December 31, 2020			December 31, 2021
Income tax benefit at statutory rates	$	(12,339	)	$	(13,246	)	$	(49,454	)
Permanent differences		325			6,434			3
Debt Extinguishment		—			—			33,746
Warrant Liabilities		—			—			11,066
Stock Compensation		—			—			10,602
Change in FV contingent consideration		—			—			(3,143	)
Foreign rate differential		(4	)		(4	)		(44	)
State income taxes, net of federal tax benefit		(2,034	)		(2,056	)		(6,424	)
Other		45			313			264
Prior Year True-Up Adjustments		—			—			(5,577	)
Valuation allowance		14,036			8,607			9,493
Total income tax expense	$	29		$	48		$	532

The Company’s effective tax rate was 0.08% and 0.23% for the years-ended December 31, 2020 and December 31, 2021, respectively. The effective tax rate in both 2020 and 2021 was principally due to minimum state taxes accrued against the Company’s pre-tax operating loss in each fiscal period.

The Company’s deferred tax assets and liabilities as of the dates indicated were as follows (in thousands):

	December 31, 2020			December 31, 2021
Deferred tax assets:
Sales returns reserve	$	133		$	130
Net operating loss carryforwards		21,070			36,250
Stock options		12,336			3,592
Deferred revenue		14			15
Interest expense limitation		2,392			10,151
Intangibles		58			0
Other		1,917			2,364
Less: valuation allowances		(37,823	)		(47,316	)
Net deferred tax assets		97			5,186
Deferred tax liabilities:
Fixed assets		(14	)		(18	)
Goodwill		(103	)		(1,528	)
Prepaid Expenses		—			(3,562	)
Intangibles		—			(560	)
Contingent Consideration		—			(1,084	)
Other		—			(130	)
Less: valuation allowances		—			—
Net deferred tax liabilities		(117	)		(6,882	)
Net deferred tax assets (liabilities)	$	(20	)	$	(1,696	)

The Company has temporary differences due to differences in recognition of revenue and expenses for tax and financial reporting purposes, principally related to net operating losses, inventory, depreciation, and other expenses that are not currently deductible or realizable. At December 31, 2020, the Company had approximately $87.0 million of gross federal net operating losses (“NOLs”), which will begin to expire in fiscal year 2034 if unused. The Company also has approximately $45.8 million apportioned state and local NOLs that expire between 2025 and 2035, depending on the state, if not used. At December 31, 2021, the Company had approximately $152.0 million of gross federal NOLs which will begin to expire in fiscal year 2034 if unused. The Company also has approximately $79.5 million apportioned state and local NOLs that expire between 2025 and 2035, depending on the state, if not used. The NOL carryforwards for federal and state income tax purposes which, generally, can be used to reduce future taxable income. The Company’s ability to utilize its NOL carryforwards may be limited pursuant to Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), if the Company has had a change in ownership of more than 50% of its capital stock over a three-year period pursuant to Section 382 of the Code. These complex changes of ownership rules generally focus on ownership changes involving stockholders owning directly or indirectly 5% or more of a company’s stock, including certain public “groups” of stockholders as set forth by Section 382 of the Code, including those arising from new stock issuances and other equity transactions.

In response to COVID-19, various governments worldwide have enacted, or are in the process of enacting, measures to provide relief to businesses negatively affected by the pandemic. On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was signed into law in the U.S. The CARES Act provides relief to U.S. corporations through financial assistance programs and modifications to certain payroll and income tax provisions. In connection with the CARES Act and other financial relief measures worldwide, the Company has recognized $1.3 million of payroll related credits in other current liabilities for the years-ended December 31, 2021. The payroll related credits are recorded in other current liabilities within the consolidated balance sheet.

The Company regularly assesses the realizability of its deferred tax assets and establishes a valuation allowance if it is more-likely-than-not that some portion of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Due to the Company’s history of net operating losses, the Company believes it is more likely than not its federal, state and foreign deferred tax assets will not be realized as of December 31, 2021.

The Company’s major taxing jurisdictions are New Jersey, New York, Florida, Texas, Pennsylvania, Tennessee, Virginia and California. The Company files a U.S. Consolidated income tax return as well as tax returns in certain foreign jurisdictions. The Company is subject to examination in these jurisdictions for all years since inception. Fiscal years outside the normal statute of limitations remain open to audit due to tax attributes generated in the early years which have been carried forward and may be audited in subsequent years when utilized. The Company is not currently under examination for income taxes in any jurisdiction. The

Company may be subject to audits covering a variety of tax matters by taxing authorities in any taxing jurisdiction where the Company conducts business. While the Company believes that the tax returns filed, and tax positions taken are supportable and accurate, some tax authorities may not agree with the positions taken. This can give rise to tax uncertainties which, upon audit, may not be resolved in the Company’s favor. As of December 31, 2020 and 2021, the Company has not recorded any tax contingency accruals for uncertain tax positions.