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Income Taxes | 12 Months Ended
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Dec. 31, 2021
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The Company’s loss before income taxes for the years ended December 31, 2021, 2020 and 2019 is comprised of the following (in thousands):
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019 |  |
Domestic | $ | (40,897) |  |  | $ | (109,837) |  |  | $ | (39,187) |  |  |
Foreign | (6,823) |  |  | (601) |  |  | (387) |  |  |
Loss before income taxes | $ | (47,720) |  |  | $ | (110,438) |  |  | $ | (39,574) |  |  |
The provision for income taxes for the years ended December 31, 2021, 2020 and 2019 is comprised of the following (in thousands):
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019 |  |
Current: |  |  |  |  |  |  |
Federal | $ | — |  |  | $ | — |  |  | $ | (49) |  |  |
State | 30 |  |  | (4) |  |  | 35 |  |  |
Foreign | 214 |  |  | 93 |  |  | 1,148 |  |  |
Total current | 244 |  |  | 89 |  |  | 1,134 |  |  |
Deferred: |  |  |  |  |  |  |
Federal | 12 |  |  | 12 |  |  | 12 |  |  |
State | — |  |  | — |  |  |  |  |
Foreign | (65) |  |  | 647 |  |  | (610) |  |  |
Total deferred | (53) |  |  | 659 |  |  | (598) |  |  |
Provision for income taxes | $ | 191 |  |  | $ | 748 |  |  | $ | 536 |  |  |
The Company’s net deferred tax liabilities consist of the following (in thousands):
| December 31,
| 2021 |  | 2020
Deferred tax assets: |  |  |
Accrued expenses | $ | 1,016 |  |  | $ | 1,940 |
Provision for excess and obsolete inventory | 466 |  |  | 2,016 |
Convertible debt | 9,804 |  |  | 13,367 |
Interest expense limitation | 11,113 |  |  | 7,798 |
Net operating loss and tax credit carryforwards | 110,463 |  |  | 108,340 |
Share-based compensation | 2,562 |  |  | 1,911 |
Right-of-use-asset | 1,765 |  |  | 2,059 |
Unrecognized tax benefits | 1,567 |  |  | 1,567 |
Deferred tax assets | 138,756 |  |  | 138,998 |
Deferred tax liabilities: |  |  |
Operating lease liability | (1,830) |  |  | (2,059) |
Acquired intangible assets | (666) |  |  | (2,155) |
Depreciation and amortization | (4,376) |  |  | (5,545) |
Unrealized foreign currency gains | (604) |  |  | (375) |
Deferred tax liabilities | (7,476) |  |  | (10,134) |
Valuation allowance | (132,132) |  |  | (133,369) |
Net deferred tax liabilities | $ | (852) |  |  | $ | (4,505) |
The Company recognizes federal, state and foreign current tax liabilities or assets based on its estimate of taxes payable to or refundable by tax authorities in the current fiscal year. The Company also recognizes federal, state and foreign deferred tax liabilities or assets based on the Company’s estimate of future tax effects attributable to temporary differences and carryforwards. The Company records a valuation allowance to reduce any deferred tax assets by the amount of any tax benefits that, based on available evidence and judgment, are not expected to be realized. The Company assesses whether a valuation allowance should be recorded against its deferred tax assets based on the consideration of all available evidence, using a “more likely than not” realization standard. The four sources of taxable income that must be considered in determining whether deferred tax assets will be realized are: (1) future reversals of existing taxable temporary differences (i.e., offset of gross deferred tax assets against gross deferred tax liabilities); (2) taxable income in prior carryback years, if carryback is permitted under the applicable tax law; (3) tax planning strategies; and (4) future taxable income exclusive of reversing temporary differences and carryforwards. During the years ended December 31, 2021, 2020 and 2019, the Company recognized valuation allowances of $6.0 million, $26.4 million and $9.2 million, respectively, related to its deferred tax assets created in those respective years for entities with historical losses and full valuation allowances. In 2021, certain valuation allowances in the amount of $10.0 million were released related to entities included in the divestiture of Ctrack South Africa. The Company also recognized $3.0 million of additional valuation allowance related to true-up of prior year deferred taxes, partially offset by foreign currency loss of $0.2 million in 2021. Based on the Company’s current position on valuation allowance, no net income tax benefits resulted in the Company’s consolidated statements of operations from the operating losses created during those years. The provision for income taxes reconciles to the amount computed by applying the statutory federal income tax rate of 21% in 2021 and 2020 to loss before income taxes as follows (in thousands):
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019 |  |
Federal tax benefit, at statutory rate | $ | (10,021) |  |  | $ | (23,192) |  |  | $ | (8,311) |  |  |
State benefit, net of federal benefit | (148) |  |  | (1,285) |  |  | 27 |  |  |
Foreign tax rate difference | (358) |  |  | (140) |  |  | 476 |  |  |
Valuation allowance against future tax benefits | 6,029 |  |  | 26,410 |  |  | 9,168 |  |  |
Gain on sale of foreign subsidiaries | 3,008 |  |  | — |  |  | — |  |  |
Sub-part F income | 791 |  |  | — |  |  | — |  |  |
Loss on conversion of debt | — |  |  | 2,015 |  |  | — |  |  |
Research and development credits | (1,415) |  |  | (2,355) |  |  | (1,456) |  |  |
Share-based compensation | (879) |  |  | (1,134) |  |  | 341 |  |  |
Non-deductible officers compensation | 1,449 |  |  | — |  |  | — |  |  |
True-up of prior year provisions | 1,681 |  |  | — |  |  | — |  |  |
Other | 54 |  |  | 429 |  |  | 291 |  |  |
Provision for income taxes | $ | 191 |  |  | $ | 748 |  |  | $ | 536 |  |  |
At December 31, 2021, the Company had U.S. federal net operating loss carryforwards (“NOLs”) related to tax years 2020 and prior of approximately $439.8 million. Approximately $110.0 million of these NOLs have no expiration date. The remainder begin to expire in 2022, unless previously utilized. Some of these NOLs may be limited by either past or future changes in control events. The Company has California net operating loss carryforwards at December 31, 2021 of approximately $58.9 million, which begin to expire in 2028, unless previously utilized, and foreign net operating losses for its active foreign subsidiaries of approximately $24.3 million, which generally have no expiration date. At December 31, 2021, the Company had federal research and development tax credit carryforwards of approximately $14.2 million, which begin to expire in 2026, unless previously utilized, and California research and development tax credit carryforwards of approximately $15.6 million, which have no expiration date. Pursuant to Internal Revenue Code (“IRC”) Sections 382 and 383, annual use of the Company’s net operating loss and research and development credit carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurs within a rolling three-year period. An analysis was performed for the period through December 31, 2021 and did not identify any events of cumulative change in ownership during the review period. The Company will continue monitoring any future changes in stock ownership. It is the Company’s intention to reinvest undistributed earnings of its foreign subsidiaries and thereby indefinitely postpone their remittance. Accordingly, no provision has been made for foreign withholding taxes on U.S. income taxes which may become payable if undistributed earnings of the foreign subsidiary were paid as dividends to the Company. On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) which includes modifications to the limitation on business interest expense and net operating loss provisions, and provides a payment delay of employer payroll taxes during 2020 after the date of enactment. Payments of approximately $1.4 million of employer payroll taxes otherwise due in 2020, were delayed with 50% due and paid by December 31, 2021 and the remaining 50% by December 31, 2022. The CARES Act did not have a material impact on the Company’s consolidated financial statements. The Company follows the accounting guidance related to financial statement recognition, measurement and disclosure of uncertain tax positions. The Company recognizes the impact of an uncertain income tax position on an income tax return at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. No income tax benefit was recognized during the years ended December 31, 2021 and 2020. At December 31, 2021 and 2020, the Company did not have interest expense related to uncertain tax positions or a liability for unrecognized tax benefits. The Company does not expect changes to its uncertain tax position in the next twelve months. A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows (in thousands):
Balance at December 31, 2019 | $ | 37,835 |
Increases related to current and prior year tax positions | 1,796 |
Balance at December 31, 2020 | 39,631 |
Increases related to current and prior year tax positions | 1,998 |
Balance at December 31, 2021 | $ | 41,629 |
There are no tax benefits that, if recognized, would affect the effective tax rate that are included in the balances of unrecognized tax benefits at December 31, 2021. The Company and its subsidiaries file U.S., state and foreign income tax returns in jurisdictions with various statutes of limitations. The Company’s tax returns are subject to examination by federal, state and foreign taxing authorities. The Company’s federal and state tax returns are subject to examination for the years beginning in 2018 and 2017, respectively. Net operating loss carryforwards arising prior to these years are also open to examination, if and when utilized. The Company believes appropriate provisions for all outstanding issues have been made for all jurisdictions and all open years. However, because audit outcomes and the timing of audit settlements are subject to significant uncertainty, the Company’s current estimate of the total amounts of unrecognized tax benefits could increase or decrease for all open years.

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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 http://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 http://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 http://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 http://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 http://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 http://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 http://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 http://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 http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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