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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes

Note 10 - Income Taxes

 

The loss before income taxes includes the following components (in thousands):

               
   For the Years Ended December 31,  
   2021   2020    2019  
United States  $377,421   $608,950    $ 43,399  
International   8,223    102      -  
Loss before income taxes  $385,644   $609,052    $ 43,399  

 

The benefit of income taxes for the years ended December 31, 2021, 2020 and 2019 consist of the following (in thousands):

 

                 
  

For the Years Ended

December 31,

  
   2021   2020    2019  
U.S. Federal                  
Current  $-   $-      -  
Deferred   2,082    7,930      4,302  
State and local                  
Current   -    -      -  
Deferred   599    1,730      970  
Valuation allowance   -    -      -  
Income tax benefit  $2,681   $9,660      5,272  

 

 

A reconciliation of the statutory federal rate to the Company’s effective tax rate is as follows:

 

                
   December 31,  
   2021    2020      2019  
Federal rate   21.00%    21.00%     21.00 %
State income taxes, net of federal benefit   0.16     0.28      4.74  
Non-controlling interest   -     -      (0.82 )
Nexway activity and deconsolidation   -     (0.40)     -  
Common stock issued for services   -     -      (0.82 )
Incentive stock options   (2.42)    (0.38)     -  
Change in fair value of derivative, warrant liability, and gain on extinguishment of convertible notes   

0.14

     (3.42)    

1.16
Amortization of debt discount   -     -      (0.13 )
Loss on investments    -     -      (1.81 )
Foreign rate differential   0.12     -      -
Goodwill impairment   -    (5.10)     -  
Change in valuation allowance   (18.80 )   (10.27)     (9.49 )
Other   0.50    (0.12)     -  
Income tax benefit   0.70%    1.58%     13.83 %

 

The components of our deferred tax assets are as follows (in thousands):

 

          
  December 31, 
  2021     2020 
Deferred tax assets:           
Net operating losses $

234,542

     $133,281 
Accruals and deferrals  

7,812

      4,419 
Stock based compensation  

10,280

      6,732 
Interest expense limitation  

11,945

      4,409 
Leasing assets  8,881      - 
Other  27      1,965 
Total deferred tax assets  

273,487

      150,806 
Less: Valuation allowance  (219,609)     (102,869)
Net deferred tax assets $53,878     $47,937 
            
Deferred tax liabilities:           
Intangible assets $47,503    $51,736 
Property and equipment  8,651      - 
Other  155     1,301 
Total deferred tax liabilities $56,309     $53,037 
            
Net deferred tax liabilities $2,431     $5,100 

 

The Company regularly evaluates the realizability of its deferred tax assets and establishes a valuation allowance if it is more likely than not that some or all the deferred tax assets will not be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, loss carryback and tax-planning strategies. Generally, more weight is given to objectively verifiable evidence, such as the cumulative loss in recent years, as a significant piece of negative evidence to overcome. At December 31, 2021 and 2020, the Company continued to maintain that the realization of its deferred tax assets has not achieved a more likely than not threshold therefore, net deferred tax assets have been offset by a valuation allowance. The valuation allowance increased by $116.7 million and $102.9 million in the years ended December 31, 2021 and December 31, 2020, respectively.

 

 

On March 27, 2020 the U.S. enacted the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act). On December 21, 2020, The U.S. Congress passed the Consolidation Appropriations Act, 2021 (the CAA Act). We have evaluated the provisions of the CARES Act and CCA Act and determined that it did not result in a significant impact on our tax provision.

 

As of December 31, 2021, the Company had federal net operating loss carryforwards of $811.3 million. The federal net operating loss carryforwards of $88.1 million generated before January 1, 2018 will begin to expire in 2033, and $723.2 million will carryforward indefinitely but are subject to the 80% taxable income limitation.

 

As of December 31, 2021, the Company had state net operating loss carryforwards of $420.4 million. The state net operating loss carryforward of $329.7 million will begin to expire in 2033 and $90.7 million will carryforward indefinitely but are subject to the 80% taxable income limitation.

 

As of December 31, 2021, the Company had foreign net operating loss carryforwards of $156.1 million. The foreign net operating loss carryforward will carryforward indefinitely but are subject to a limitation on the amount that can be used to offset taxable income in a given year.

 

Utilization of the NOL carryforwards may be subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by the Internal Revenue Code, as well as similar state provisions. In general, an “ownership change” as defined by Code Sections 382 and 383, results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders or public groups. Since the Company’s formation, the Company has raised capital through the issuance of capital stock on several occasions which, combined with the purchasing stockholders’ subsequent disposition of those shares have resulted in such an ownership change and could result in an ownership change in the future upon subsequent disposition.

 

The Company conducted an analysis of our stock ownership under Internal Revenue Code Section 382 and 383. The net operating loss carryforwards are subject to annual limitations as a result of the ownership changes in 2015, 2016, 2019 and 2020. Approximately $1.1 million of the net operating loss carryforwards are expected to expire before the utilization.

 

The Company follows the provisions of FASB Accounting Standards Codification (ASC 740-10), Accounting for Uncertainty in Income Taxes. ASC 740-10 prescribes a comprehensive model for the recognition, measurement, presentation and disclosure in financial statements of uncertain tax positions that have been taken or expected to be taken on an income tax return. No liability related to uncertain tax positions was required to be recorded in the financial statements as of December 31, 2021 and 2020.

 

The Company’s policy is to recognize interest and penalties accrued on uncertain income tax positions in income tax expense in the Company’s consolidated statements of operations. The Company had not incurred any material tax interest or penalties as of December 31, 2021 and 2020. The Company does not anticipate any significant change within 12 months of this reporting date of its uncertain tax positions.

 

The Company is subject to taxation in the United States and various state jurisdictions, France, Spain and India. The Company had been delinquent in filings since December 31, 2014. During 2020, the Company filed all past due income tax returns There are no ongoing examinations by taxing authorities at this time. The Company’s tax years 2013 through 2021 will remain open for examination by the federal and state authorities for three and four years, respectively, from the date of utilization of any net operating loss credits. The Company’s 2018 to 2021 tax years will remain open for examination by the Spain tax authority for four years starting from the day following the date of termination of the voluntary tax filing period. The Company’s 2021 tax years will remain open for examination by the France and Indian tax authorities.