PROVISION FOR INCOME TAXES

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

PROVISION FOR INCOME TAXES

PROVISION FOR INCOME TAXES:

Income Taxes

Deferred tax assets and liabilities are recognized based on the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, utilizing the tax rates that are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

U.S. and foreign components of income (loss) before income taxes were:

	Year Ended December 31,
	2021		2020
U.S. operations	$	(101,146)	$	(14,084)
Foreign operations	$	(51,492)	$	(4,955)
Total loss before income taxes	$	(152,638)	$	(19,039)

The components of the provision (benefit) for income taxes are as follows: 

	Year Ended December 31,
	2021		2020
Current provision (benefit):
Federal	$	—	$	—
State	$	19	$	1
Foreign	$	28	$	4
	$	47	$	5
Deferred provision (benefit):
Federal	$	(8,362)	$	(4,216)
State	$	(4,629)	$	2,285
Foreign	$	—	$	(1,237)
Valuation allowance	$	12,991	$	3,168
	$	—	$	—
Total	$	47	$	5

The provision (benefit) for income taxes differs from the amount that would result by applying the applicable federal income tax rate to income before income taxes, as follows: 

	Year Ended December 31,
	2021		2020
Provision computed at Federal statutory rate	21.0	%	21.0	%
Change in valuation allowance	(8.5)		(17.2)
Return to provision adjustments	1.0		(6.7)
Foreign income tax rate and benefit	0.1		6.7
Effect of permanent differences	0.4		(0.2)
Non-deductible expenses - mark to market liabilities	(11.5)	%	—	%
Stock based compensation	(5.5)	%	(0.5)	%
State tax, net of federal	2.7		0.2
Deferred tax asset and liability adjustment	0.4		(3.2)
Other	(0.1)		(0.1)
Total	0.0	%	0.0	%

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. At December 31, 2021 and 2020, deferred tax assets and liabilities consisted of the following:

	December 31,
	2021		2020
Deferred tax assets:
Net operating loss carryforwards	$	28,052	$	17,146
Benefit of tax credit carry-forwards	$	207	$	207
Start up costs	$	2,009	$	1,648
Other	$	2,367	$	410
Valuation allowance	$	(32,382)	$	(19,392)
	$	253	$	19
Deferred tax liabilities:
Depreciation	$	(253)	$	(19)
	$	(253)	$	(19)
Net deferred tax balance	$	—	$	—

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all 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. Management considers the scheduled reversal of deferred tax liabilities and projected future taxable income. In the event that the Company determines, based on available evidence and management judgment, that all or part of the net deferred tax assets will not be realized in the future, the Company would record a valuation allowance in the period the determination is made. In addition, the calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws. Resolution of these uncertainties in a manner inconsistent with the Company’s expectations could have a material impact on its results of operations and financial position.

At December 31, 2021, the Company has approximately $100,147 of federal net operating loss (“NOL”) carryforwards and approximately $82,583 of State NOL carryforwards expiring in varying amounts through 2037, with the exception Federal NOLs arising from the years ended after December 31, 2017 that may be carried forward indefinitely. Realization of the NOL carryforwards is dependent on the Company generating sufficient taxable income prior to expiration of the NOL carryforwards and is also potentially subject to usage limitations due to changes in the Company’s

ownership. As of December 31, 2021, the Company continues to maintain a valuation allowance as the Company believes that it is not more likely than not that the deferred tax assets will be fully realized.

The transfer of intellectual property and other intangible assets by Navitas U.S. to Navitas Ireland in connection with the Restructuring was among entities within the same consolidated group for U.S. federal income tax purposes, and as a result, any gain or loss to Navitas U.S. is expected to be deferred for U.S. federal income tax purposes.

The Company had no unrecognized tax benefits for the years ended December 31, 2021 or December 31, 2020. We recognize interest and penalties related to unrecognized tax benefits in operating expenses. No such interest and penalties were recognized during the years ended December 31, 2021 and 2020.