Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

10. Income taxes

The Company had no income tax expense for the year ended December 31, 2022 and 2021, due to its history of operating losses. During the years ended December 31, 2022 and 2021 the Company recorded a net loss of $113.0 million and $192.0 million, respectively.

The effective tax rate for the years ended December 31, 2022 and 2021 is different from the federal statutory rate primarily due to the tax benefit of the Company’s net loss and comprehensive loss not being more likely than not to be realized. The following is a reconciliation of the statutory federal income tax rate to the Company's effective tax rate:

	December 31,
Effective income tax rate:	2022			2021
Expected income tax benefit at the federal statutory rate		21.0	%		21.0	%
State taxes, net of federal benefit		6.0			7.7
Research and development tax credits		0.9			0.8
Permanent differences		(0.5	)		(0.2	)
Change in valuation allowance		(27.4	)		(29.3	)
Total provision for income taxes	—%			—%

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred income taxes are as follows (in thousands):

	December 31,
	2022			2021
Deferred tax assets:
Federal and state operating loss carryforwards	$	66,709		$	60,966
Research and development tax credits		8,384			6,655
Lease liabilities		9,420			4,221
Manufacturing line and production equipment		27,875			29,153
Inventory related costs		12,669			11,076
Compensation related items		2,838			2,877
Capitalized research and development costs		17,880			—
Property and equipment		1,200			—
Other		905			141
Total gross deferred tax asset		147,880			115,089
Valuation allowance		(140,411	)		(111,024	)
Net deferred tax asset		7,469			4,065
Deferred tax liabilities:
Property and equipment		—			(167	)
Operating lease right-of-use asset		(7,469	)		(3,898	)
Total deferred tax liabilities		(7,469	)		(4,065	)
Net deferred tax asset	$	—		$	—

The Company determines its valuation allowance on deferred tax assets by considering both positive and negative evidence in order to ascertain whether it is more likely than not that deferred tax assets will be realized. Realization of deferred tax assets is dependent upon the generation of future taxable income. Because of the Company's history of operating losses, the Company believes that the realization of its deferred tax assets is not more likely than not to be realized and, accordingly, has provided a valuation allowance. The valuation allowance increased by $29.4 million and $59.7 million for the years ended December 31, 2022 and 2021, respectively, primarily due to the increase in the Company's net loss and comprehensive loss.

NOLs and tax credit carryforwards as of December 31, 2022 are as follows (in thousands):

	Amount		Expiration Years
NOLs, federal (post December 31, 2017)	$	202,240	Do not expire
NOLs, federal (pre January 1, 2018)		30,901	2033 - 2037
NOLs, state		204,050	2033 to 2041
Research and development tax credits, federal		9,596	2035 to 2041
Research and development tax credits, state		7,759	Do not expire

Utilization of the NOL carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 as amended (Section 382) due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain

stockholders or public groups in the stock of a corporation by more than 50% over a three-year period. The Company has not conducted a study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception due to the significant complexity and cost associated with such a study. If the Company has experienced a change of control, as defined by Section 382, at any time since inception, utilization of the NOL carryforwards or research and development tax credit carryforwards would be subject to an annual limitation under Section 382, which is determined by first multiplying the value of the Company's stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required. Any limitation may result in expiration of a portion of the NOL carryforwards or research and development tax credit carryforwards before utilization. Until a study is completed no limitations have been recorded.

Uncertain tax positions

A reconciliation of the beginning and ending balance of total gross unrecognized tax benefits is as follows (in thousands):

	December 31,
	2022		2021
Unrecognized tax benefits at the beginning of the period	$	7,244	$	4,841
Additions for current tax positions		1,729		2,403
Changes for previous tax positions		—		—
Unrecognized tax benefits at the end of the period	$	8,973	$	7,244

During the years ended December 31, 2022 and 2021, the Company recognized no interest and penalties associated with unrecognized tax benefits. There are no tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within twelve months of the reporting date.

The Company files income tax returns in the U.S. federal and various tax jurisdictions. The federal and state income tax returns from inception through December 31, 2022 remain subject to examination by federal and state authorities, where applicable. There are currently no pending income tax examinations.