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

Note 5: Income Taxes

The components of loss from continuing operations before provision for income taxes consist of the following (in thousands):

 

 

Years Ended December 31,

 

(In Thousands)

 

2020

 

 

2021

 

United States

 

$

(38,891

)

 

$

(1,173

)

Foreign

 

 

(5,044

)

 

 

(2,985

)

Loss from continuing operations before provision for income taxes

 

$

(43,935

)

 

$

(4,158

)

 

The provision for income taxes for the Company’s continuing operations consists of the following (in thousands):

 

 

Years Ended December 31,

 

(In Thousands)

 

2020

 

2021

 

Current federal provision

 

 

 

 

 

 

 

State

 

$

21

 

$

204

 

Deferred provision (benefit)

 

 

 

 

 

 

 

Federal

 

 

(901

)

 

20

 

State

 

 

(153

)

 

106

 

Foreign

 

 

(884

)

 

(98

)

Total income tax expense (benefit)

 

$

(1,917

)

$

232

 

 

The Company’s income tax benefit from continuing operations differed from the amounts computed by applying the U.S. federal statutory rate to loss before provision for income taxes as a result of the following:

 

Years Ended December 31,

 

(In Thousands)

2020

 

2021

 

Income tax benefit at U.S. statutory rate

$

(9,226

)

$

(873

)

State taxes, net of valuation allowance

 

(103

)

 

(448

)

Stock-based compensation (1)

 

154

 

 

434

 

Valuation allowance

 

7,427

 

 

3,334

 

Foreign tax differential

 

(1,124

)

 

(747

)

Tax credits

 

(368

)

 

(544

)

Impairment

 

1,533

 

 

—

 

Acquisition/accretion benefits

 

(250

)

 

(1

)

Gain on CARES Act loan

 

—

 

 

(1,089

)

Meals and entertainment

 

1

 

 

68

 

Other expenses

 

39

 

 

98

 

Total income tax expense (benefit)

$

(1,917

)

$

232

 

(1) Includes non-deductible stock-based compensation and excess tax benefits and shortfalls from stock-based compensation.

 

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below and reflects the 21% U.S. federal statutory rate for 2020 and 2021 (in thousands):

 

 

Years Ended December 31,

 

(In Thousands)

 

2020

 

2021

 

Deferred tax assets:

 

 

 

 

 

 

 

Accrued liabilities not currently deductible

 

$

651

 

$

476

 

Intangible assets- excess of financial statement

   over tax amortization

 

 

982

 

 

5,985

 

Goodwill recognized on financial statements in

   excess of tax amortization

 

 

(18

)

 

—

 

Stock-based compensation

 

 

2,524

 

 

2,405

 

Federal net operating and capital losses

 

 

21,531

 

 

35,052

 

State, local and foreign net operating and capital loss carryforwards

 

 

12,325

 

 

3,353

 

Research & experimental tax and other credit carryforwards

 

 

4,640

 

 

5,184

 

Lease liability

 

 

1,250

 

 

866

 

Other

 

 

735

 

 

547

 

Gross deferred tax assets

 

 

44,620

 

 

53,868

 

Valuation allowance

 

 

(43,314

)

 

(53,066

)

Net deferred tax assets

 

$

1,306

 

$

802

 

Deferred tax liabilities:

 

 

 

 

 

 

 

Intangible assets-excess of tax over

   financial statement amortization

 

 

(532

)

 

(393

)

Right-of-use lease asset

 

 

(930

)

 

(595

)

Net deferred tax liabilities

 

$

(156

)

$

(186

)

 

As of December 31, 2021, the Company’s federal NOL carryforwards were approximately $166.9 million and federal research and development credit carryforwards were $6.1 million. These will begin to expire in 2027 and 2029, respectively, for income tax purposes. These credits are potentially available to offset future tax liabilities. The Tax Reform Act of 1986 limits the use of NOL and tax credit carryforwards in certain situations where changes occur in the stock ownership of a company. The Company is not aware that any such change has occurred related to these specific NOL carryforwards, or that the utilization of the carryforwards is limited such that these NOL carryforwards will likely never be utilized. Accordingly, the Company has included these federal NOL carryforwards in its deferred tax assets (subject to valuation allowance).

 

The Company has recorded a deferred tax asset for stock-based compensation recorded on unexercised non-qualified stock options and certain restricted shares and restricted share units. The ultimate realization of this asset is dependent upon the fair value of the Company’s stock when the options are exercised and when restricted shares or restricted share units vest, and generation of sufficient taxable income to realize the benefit of the related tax deduction.

 

At December 31, 2020 and 2021, the Company recorded a valuation allowance of $43.3 million, and $53.1 million, respectively, against its federal, state, city and foreign net deferred tax assets for continuing operations, as it believes it is more likely than not that these benefits will not be realized. The net change in the total valuation allowance for each of the years ended December 31, 2020 and 2021 was $24.2 million and $9.8 million, respectively.

 

The Company regularly reviews deferred tax assets to assess whether it is more likely than not that the deferred tax assets will be realized and, if necessary, establishes a valuation allowance for portions of such assets to reduce the carrying value. In assessing whether it is more likely than not that the Company’s deferred tax assets will be realized, factors considered included: historical taxable income, historical trends related to customer usage rates, projected revenues and expenses, macroeconomic conditions, issues facing the industry, existing contracts, the Company’s ability to project future results and any appreciation of its other assets. The Company incurred taxable losses from 2016 through 2021. Based on the level of historical taxable losses and the uncertainty of projections for future taxable income over the periods for which the deferred tax assets are deductible, with the exception of certain insignificant foreign deferred tax assets, the Company concluded that it is not more likely than not that the gross deferred tax assets will be realized.

 

 

From time to time, various state, federal and other jurisdictional tax authorities undertake audits of the Company and its filings. In evaluating the exposure associated with various tax filing positions, the Company on occasion accrues charges for uncertain positions. Resolution of uncertain tax positions will impact the Company’s effective tax rate when settled. The Company does not have any significant interest or penalty accruals. The provision for income taxes includes the impact of contingency provisions and changes to contingencies that are considered appropriate. The following table summarizes activity related to tax contingencies from January 1, 2020 to December 31, 2021 which are recorded as an offset to deferred tax assets (in thousands):

(In Thousands)

 

 

 

 

Gross tax contingencies—January 1, 2020

 

$

1,268

 

Gross increases to tax positions associated with prior

   periods

 

 

—

 

Gross increases to current period tax positions

 

 

97

 

Gross decreases to tax positions associated with prior

   periods

 

 

—

 

Settlements

 

 

—

 

Lapse of statute of limitations

 

 

—

 

Gross tax contingencies—December 31, 2020

 

 

1,365

 

Gross increases to tax positions associated with prior

   periods

 

 

—

 

Gross increases to current period tax positions

 

 

72

 

Gross decreases to tax positions associated with prior

   periods

 

 

(55

)

Settlements

 

 

—

 

Lapse of statute of limitations

 

 

—

 

Gross tax contingencies—December 31, 2021

 

$

1,382