Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

10. Income Taxes

The components of income (loss) before income taxes were as follows:

	Years Ended December 31,
	2021			2020			2019
	(in thousands)
United States	$	32,379		$	(9,645	)	$	(6,485	)
Foreign		(24	)		274			(130	)
	$	32,355		$	(9,371	)	$	(6,615	)

The components of income tax (expense) benefit were as follows:

	Years Ended December 31,
	2021			2020			2019
	(in thousands)
United States	$	(12	)	$	(1	)	$	8
Foreign		(66	)		—			—
	$	(78	)	$	(1	)	$	8

The material components of the deferred tax assets and liabilities consisted of net operating loss carry-forwards and tax credit carry-forwards.

	Years Ended December 31,
	2021			2020			2019
	(in thousands)
Deferred tax assets (liabilities):
Accrual, write-down and other	$	5,442		$	3,249		$	2,469
Depreciation and amortization		(818	)		257			76
Net operating loss and credits carry forwards		64,690			52,445			42,949
Total gross deferred tax assets (liabilities)		69,314			55,951			45,494
Valuation allowance		(69,314	)		(55,951	)		(45,494	)
Total net deferred tax assets	$	—		$	—		$	—

The net valuation allowance increased by $13.4 million for the year ended December 31, 2021.

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

	Years Ended December 31,
	2021			2020			2019
	(in thousands)
US Federal Rate		21.0	%		21.0	%		21.0	%
R&D Credits		-			-			(10.9	)
Permanent differences and others		(63.3	)		90.4			(18.3	)
Change in valuation allowance		42.3			(111.4	)		8.2
		0.0	%		0.0	%		0.0	%

The reported amount of income tax expense differs from an expected amount based on statutory rates primarily due to the Company’s valuation allowance.

As of December 31, 2021 and 2020, based on the available objective evidence, management believes it is more likely than not that the net deferred tax assets will not be realized. Accordingly, management has applied a full valuation allowance against its net deferred tax assets at December 31, 2021 and 2020.

At December 31, 2021 and 2020, the Company has federal net operating loss carry-forwards of approximately $259.6 million and $201.5 million, respectively, and state net operating loss carry-forwards of approximately $64.5 million and $64.0 million, respectively. At December 31, 2021 and 2020, the Company has net operating loss carryforwards for foreign income tax purposes of approximately $2.3 million and $2.2 million, respectively. These federal, state, and foreign net operating loss carry-forwards will expire beginning in 2025, 2028, and 2028, respectively. Of the total federal net operating loss carryforward, $111.2 million will not expire as a result of the Tax Act.

At December 31, 2021 and 2020, the Company also has federal research and development tax credit carry-forwards of approximately $3.9 million and $3.9 million, respectively, and state research and development tax credit carry-forwards of approximately $3.6 million and $3.6 million, respectively. The federal tax credits begin to expire in 2025, and the California tax credits carry forward indefinitely.

Utilization of the net operating loss carry-forwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended (“the Code”), and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization.

As of December 31, 2021 and 2020, the Company had $2.4 million and $2.4 million of total unrecognized tax benefits. The Company currently has a full valuation allowance against its net deferred tax assets which would impact the timing of the effective tax rate benefit should any of these uncertain tax positions be favorably settled in the future. If the Company is able to eventually recognize these uncertain tax positions, none of the unrecognized benefit would reduce the Company’s effective tax rate due to full valuation allowance of the Company’s deferred tax assets. The Company’s policy is to record interest and penalties related to unrecognized tax benefits as income tax expense. During the years ended December 31, 2021 and 2020, the Company had immaterial amounts related to the accrual of interest and penalties.

A reconciliation of the beginning and ending unrecognized tax benefit amount is as follows:

	December 31,
	2021			2020
	(in thousands)
Beginning balance	$	2,436		$	2,184
Increase (decrease) in balance related to tax position taken during prior periods		—			—
Increase (decrease) in balance related to tax position taken during the current period		(5	)		252
Ending balance	$	2,431		$	2,436

The Company does not have any tax positions for which it is reasonably possible the total amount of gross unrecognized tax benefits will increase or decrease within 12 months of the years ended December 31, 2021 and 2020.

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal, state, local, and foreign jurisdictions, where applicable. Due to the Company’s net losses, its federal, state and local, and foreign tax returns since inception are subject to audit.

As of December 31, 2021, the tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations are as follows:

Jurisdiction	Earliest Tax Year Subject to Examination
U.S. federal	2018
California State	2017
Michigan State	2017