Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

10. Income Taxes

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

	Years Ended December 31,
	2022		2021			2020
	(in thousands)
United States	$	22,208	$	32,379		$	(9,645	)
Foreign		1,128		(24	)		274
	$	23,336	$	32,355		$	(9,371	)

The components of income tax expense were as follows:

	Years Ended December 31,
	2022			2021			2020
	(in thousands)
Current Provision:
Federal	$	-		$	(11	)	$	-
State		(1	)		(1	)		(1	)
Foreign		(81	)		(66	)		—
Total current provision		(82	)		(78	)		(1	)
Total deferred provision		—			—			—
Total income tax provision	$	(82	)	$	(78	)	$	(1	)

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,
	2022			2021			2020
	(in thousands)
Deferred tax assets (liabilities):
Accrual, write-down and other	$	5,433		$	5,442		$	2,469
Section 174 Costs		23,513			-			-
Depreciation and amortization		(1,576	)		(818	)		76
Credits		5,657			-			-
Net operating loss and credits carry forwards		49,647			64,690			42,949
Total gross deferred tax assets (liabilities)		82,674			69,314			45,494
Valuation allowance		(82,674	)		(69,314	)		(45,494	)
Total net deferred tax assets	$	—		$	—		$	—

The net valuation allowance increased by $13.1 million for the year ended December 31, 2022.

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

	Years Ended December 31,
	2022			2021			2020
US Federal Rate		21.0	%		21.0	%		21.0	%
RSU excess tax expense		(88.6	)		(79.0	)		93.3
Permanent differences and others		10.9			15.7			(2.9	)
Change in valuation allowance		57.0			42.3			(111.4	)
		0.3	%		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, 2022 and 2021, 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, 2022 and 2021.

At December 31, 2022 and 2021, the Company has federal net operating loss carry-forwards of approximately $213.3 million and $259.6 million, respectively, and state net operating loss carry-forwards of approximately $65.3 million and $64.5 million, respectively. At December 31, 2022 and 2021, the Company has net operating loss carryforwards for foreign income tax purposes of approximately $1.7 million and $2.3 million, respectively. These federal, state, and foreign net operating loss carry-forwards will expire beginning in 2025, 2028, and 2028, respectively.

At December 31, 2022 and 2021, 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, 2022 and 2021, the Company had $2.3 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, 2022 and 2021, 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,
	2022			2021
	(in thousands)
Beginning balance	$	2,431		$	2,436
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		(129	)		(5	)
Ending balance	$	2,302		$	2,431

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, 2022 and 2021.

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.