Income Taxes

12 Months Ended

Dec. 31, 2022

Income Taxes

Income Taxes

10. Income Taxes

As of December 31, 2022, the Company had federal, state and foreign net operating loss carryforwards of approximately $210,487, $191,524 and $393, respectively, which begin to expire in 2030 for federal and state purposes, while the foreign net operating losses carryforward indefinitely. The Company’s federal net operating losses include $129,179 which can be also carried forward indefinitely.

The Company may be able to utilize its net operating loss carryforwards to reduce future federal and State income tax liabilities. However, these net operating losses are subject to various limitations under Internal Revenue Code (“IRC”) section 382, which limit the use of net operating loss carryforwards to the extent there has been an ownership change of more than 50 percentage points. In addition, the net operating loss carryforwards are subject to examination by taxing authorities and could be adjusted or disallowed due

to such exams. Although the Company has not undergone an IRC section 382 analysis, it is possible that the utilization of the Company’s net operating loss carryforwards may be limited.

10. Income Taxes (continued)

In addition, the Company has federal and state research and development tax credits of approximately $7,903 and $1,841, respectively, that begin to expire in 2030 for federal and state tax purposes.

There is no provision for income taxes in the United States because the Company has historically incurred operating losses and maintains a full valuation allowance against its deferred tax assets in these jurisdictions.

Income (loss) before income taxes consisted of the following:

	Year Ended
	December 31,
	2022		2021
U.S.	$	(50,325)	$	(39,155)
Foreign		(4,124)		(1,456)
Loss before income taxes	$	(54,449)	$	(40,611)

A summary of the Company’s current and deferred expense for income tax is as follows:

	Year Ended
	December 31,
	2022		2021
Current expense (benefit):
Federal	$	—	$	—
State		—		—
Foreign		—		(37)
Total current expense (benefit):	$	—	$	(37)
Deferred expense (benefit):
Federal	$	—	$	—
State		—		—
Foreign		147		13
Total deferred expense (benefit):	$	147	$	13
Total income tax expense (benefit):	$	147	$	(24)

A reconciliation of the Company’s statutory income tax rate to the Company’s effective income tax rate is as follows:

	Year Ended
	December 31,
	2022		2021
Income at US Statutory Rate	21.0	%	21.0	%
State taxes, net of federal benefit	6.0	%	7.2	%
Permanent differences	0.7	%	0.6	%
Research and development credits	1.0	%	1.5	%
Foreign rate differential	0.3	%	0.2	%
Change in valuation allowance	-27.3	%	-30.6	%
Other	2.0	%	0.1	%
	0.3	%	0.0	%

10. Income Taxes (continued)

The significant components of the Company’s deferred tax assets as of December 31, 2022 and 2021 were as follows:

	Year Ended
	December 31,
	2022		2021
Federal net operating loss carryforwards	$	44,202	$	41,207
State net operating loss carryforwards		12,104		11,246
Foreign net operating loss carryforwards		98		—
Research and development (R&D) tax credits		9,358		7,172
Capitalized R&D expenses		9,312		—
Stock based compensation		4,757		4,671
Accrued expenses		—		729
License fees		840		1,004
Other		297		212
Total Deferred tax assets		80,968		66,241
Valuation Allowance		(80,968)		(66,082)
Net deferred tax assets	$	—	$	159

As of December 31, 2022, the Company has provided a full valuation allowance against its overall net deferred tax assets, as realization of any associated tax benefit in the future is not more likely than not. As of December 31, 2021, the Company had provided a full valuation allowance against its net US deferred tax assets, but had recorded a deferred tax asset with no offsetting valuation allowance for its foreign subsidiary. Under applicable accounting requirements, as of December 31, 2022, the Company has established a full valuation allowance against its Australia deferred tax assets based on negative evidence associated with a three-year cumulative loss position. The valuation allowance, inclusive of the adjustment for the Australia deferred tax asset, increased during the years ended December 31, 2022 and 2021 by $14,886 and $12,413, respectively.

The Tax Cuts and Jobs Act (“TCJA”) resulted in significant changes to the treatment of research and developmental expenditures under Section 174. For tax years beginning after December 31, 2021, taxpayers are required to capitalize and amortize all research and development expenditures that are paid or incurred in connection with their trade or business. Specifically, costs for U.S.-based research and development activities must be amortized over five years and costs for foreign research and development activities must be amortized over 15 years, both using a midyear convention. During the year ended December 31, 2022, the Company capitalized $37,873 million of research and development expenses.

The Company follows the authoritative guidance on accounting for and disclosure of uncertainty in tax positions, which requires the Company to determine whether a tax position of the Company is more likely than not to be sustained upon examination, including resolution of any related appeals of litigation processes, based on the technical merits of the position. For tax positions meeting the more likely than not threshold, the tax amount recognized in the financial statements is reduced by the largest benefit that has a greater than 50% likelihood of being realized upon the ultimate settlement with the relevant taxing authority. As of December 31, 2022 the Company has not recorded any uncertain tax positions.

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 and state jurisdictions, where applicable. There are currently no pending tax examinations. The earliest tax years that may be subject to examination by jurisdiction are 2019 for both federal and state purposes. The Company’s policy is to record interest and penalties related to income taxes as part of the tax provision. There were no interest and penalties pertaining to uncertain tax positions for the years ended December 31, 2022 or 2021.