v3.22.4

INCOME TAXES | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Total income tax benefit for the years ended December 31, 2022, 2021 and 2020 was allocated as follows:
|  | 2022 |  | 2021 |  | 2020
Total tax expense (benefit) |  | $ | (4,947) |  |  | $ | (1,128) |  |  | $ | (723) |
For the years ended December 31, 2022, 2021 and 2020 loss before taxes of the Company consists of the following:
|  | 2022 |  | 2021 |  | 2020
Domestic |  | $ | 6,451 |  |  | $ | (9,232) |  |  | $ | (28,756) |
Foreign |  | (10,140) |  |  | (8,156) |  |  | (4,911) |
Total |  | $ | (3,689) |  |  | $ | (17,388) |  |  | $ | (33,667) |
The components of income tax benefit for the years ended December 31, 2022, 2021 and 2020 are as follows:
| 2022 |  | 2021 |  | 2020
Current: |  |  |  |  |
Federal | $ | — |  |  | $ | — |  |  | $ | — |
State | 68 |  |  | — |  |  | — |
Foreign | 17 |  |  | — |  |  | — |
| 85 |  |  | — |  |  | — |
Deferred: |  |  |  |  |
Federal | $ | — |  |  | $ | — |  |  | $ | — |
State | — |  |  | — |  |  | — |
Foreign | (2,018) |  |  | (1,128) |  |  | (723) |
Decrease in valuation allowance | (3,014) |  |  | — |  |  | — |
Total income tax expense (benefit) | $ | (4,947) |  |  | $ | (1,128) |  |  | $ | (723) |
The reconciliation between the effective tax rate and the statutory tax rate is as follows:
| December 31,
| 2022 |  | 2021 |  | 2020
Federal statutory rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State statutory rate, net of federal benefit | (6.3) | % |  | 2.0 | % |  | 1.8 | %
Effect of foreign rates different from statutory | 6.4 | % |  | (0.1) | % |  | 0.1 | %
Change in state rate | 0.9 | % |  | (1.3) | % |  | (2.5) | %
Excess tax benefits from stock plans | 9.6 | % |  | 7.5 | % |  | 0.6 | %
Nondeductible/nontaxable or other items | (22.1) | % |  | 11.9 | % |  | 0.5 | %
Unborn foreign tax deduction | 6.8 | % |  | (1.5) | % |  | 4.0 | %
US benefit of foreign branches | 64.4 | % |  | — | % |  | — | %
Nondeductible executive compensation | (4.4) | % |  | — | % |  | — | %
Change in valuation allowance | 57.8 | % |  | (33.1) | % |  | (23.4) | %
Income tax (expense) benefit | 134.1 | % |  | 6.3 | % |  | 2.1 | %
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 primary temporary differences that give rise to the deferred tax assets and liabilities are certain inventory adjustments, depreciation and amortization, interest expense, stock based compensation and net operating loss carryforwards. The deferred tax assets and liabilities consisted of the following at December 31, 2022 and 2021:
| 2022 |  | 2021
Deferred tax assets: |  |  |
Inventories, net | $ | 5,804 |  |  | $ | 4,206 |
Stock based compensation | 2,534 |  |  | 2,454 |
Loss carryforwards | 38,443 |  |  | 35,421 |
Credit carryforwards | 176 |  |  | 176 |
Interest carryforward | 520 |  |  | 338 |
Other | 787 |  |  | 444 |
Total deferred tax assets | 48,264 |  |  | 43,039 |
Valuation allowance | (36,778) |  |  | (38,911) |
Net deferred tax assets | 11,486 |  |  | 4,128 |
Deferred tax liabilities: |  |  |
Intangibles | (15,737) |  |  | (7,518) |
Property, plant and equipment | (1,703) |  |  | (1,238) |
Total deferred tax liabilities | (17,440) |  |  | (8,756) |
Foreign currency translation impact | — |  |  | (143) |
Deferred tax assets (liabilities), net | $ | (5,954) |  |  | $ | (4,771) |
The deferred tax assets were fully offset by a valuation allowance at December 31, 2022 and 2021, with the exception of certain deferred tax liabilities recognized in a foreign jurisdiction as a result of fair value adjustments recorded upon the acquisition of ApiFix. The Company has recorded a tax benefit during the year ended December 31, 2022 for losses generated in Canada and Israel and 2021, for losses generated in Israel. A portion of the valuation allowance was reversed during the year ended December 31, 2022 as a result of the MD Ortho and corresponding deferred tax liabilities acquired reducing the deferred tax assets of the Company. As of December 31, 2022, we had available federal, state and foreign tax loss carryforwards of $117,095, $74,794 and $24,374, respectively. We had available federal tax credits of $176. Net operating losses generated prior to December 31, 2017 will begin to expire in 2028. Federal net operating losses generated after January 1, 2018 will have an indefinite carryforward period. An ownership change under Section 382 of the Internal Revenue Code was deemed to occur on May 30, 2014. Given the limitation calculation, we anticipate approximately $23,920 in losses generated prior to the ownership change date will be subject to potential limitation. The estimated annual limitation is $1,062. A second ownership change under Section 382 was deemed to occur on December 11, 2018. The estimated annual limitation is $9,736, which is increased by $22,430 over the first five years as a result of an unrealized built in gain. NOLs sustained prior to May 30, 2014 will still be constricted by the lower limitation. Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2022. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth. As a result, a full valuation continues to be recorded against the Company's net deferred tax assets, with the exception of Canada and Israel. We are subject to taxation in the United States, Indiana and various other state and international jurisdictions. As of December 31, 2022, all tax years from 2008 remain open to examination by the major taxing jurisdictions to which we are subject due to our net operating loss and credit carryforwards from those years. We believe that the income tax filing positions will be sustained on audit and do not anticipate any adjustments that will result in a material change. Therefore, no reserve for uncertain income tax positions has been recorded. Interest and penalties, if any, associated with income tax examinations will be to record such items as a component of income taxes. At December 31, 2022, our foreign operations held cash totaling $2,468. We have not provided for foreign withholding tax on the undistributed earnings from our non-U.S. subsidiaries that are considered to be indefinitely reinvested. If such earnings were to be distributed, any foreign withholding tax would not be significant.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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