Note 11 - Income Taxes

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Income Tax Disclosure [Text Block]

11. Income Taxes

Income (loss) before income taxes (in thousands):

	Year Ended December 31,
	2023			2022
Domestic	$	(42,210	)	$	(58,505	)
Foreign		—			—
	$	(42,210	)	$	(58,505	)

The components of the provision for income taxes are as follows (in thousands):

	December 31,
	2023		2022
Current
Federal	$	—	$	—
State		—		3
Foreign		—		—
Total current		—		3
Deferred
Federal		—		—
State		—		—
Foreign		—		—
Total deferred		—		—
Total provision for income taxes	$	—	$	3

State income taxes are immaterial in amount and therefore have not been recorded in the Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2023 and 2022.

The provision for income taxes differs from the amount estimated by applying the statutory federal income tax rate to income (loss) before taxes as follows:

	Year Ended December 31,
	2023			2022
Federal tax at statutory rate		21.0	%		21.0	%
State tax at statutory rate		—			8.4
Research and development credits		3.7			0.9
Return to provision		2.6			—
Change in valuation allowance		(19.1	)		(18.4	)
Deferred adjustment		(1.6	)		(5.3	)
Change in tax rate		(5.8	)		—
Uncertain tax position		—			(5.7	)
Other		(0.8	)		(0.9	)
Provision for income taxes		—	%		—	%

Deferred income taxes reflect the impact of carryforwards and temporary differences between the amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws. The carryforwards and temporary differences, which give rise to a significant portion of the Company’s deferred tax asset (liability) as of December 31, 2023 and 2022, are as follows (in thousands):

	December 31,
	2023			2022
Deferred tax assets
Accruals	$	1,502		$	3,404
Net operating loss carryforwards		61,072			56,447
Tax credit carryforwards		9,815			7,111
Stock-based compensation		7,704			8,784
R&D capitalization		7,384			3,810
Lease liability		1,920			2,948
Fixed assets		7			—
Intangibles		99			—
Gross deferred tax assets		89,503			82,504
Valuation allowance		(87,853	)		(79,779	)
Total deferred tax assets		1,650			2,725
Deferred tax liabilities
Intangibles		—			(117	)
Right-of-use asset		(1,650	)		(2,593	)
Fixed assets		—			(15	)
Total deferred tax liabilities		(1,650	)		(2,725	)
Net deferred tax assets/(liabilities)	$	—		$	—

The Company’s unrecognized tax benefits as of  December 31, 2023 and 2022 were $10.2 million and $8.9 million, respectively. If recognized, none of the unrecognized tax benefits would impact income tax expense to the extent that the Company continues to maintain a full valuation allowance against its deferred tax assets.

A reconciliation of the beginning and ending amounts of unrecognized tax benefit is as follows (in thousands):

	December 31,
	2023			2022
Unrecognized tax benefits at beginning of year	$	8,925		$	5,140
Increases related to current year tax positions		1,575			2,055
Increases related to prior year tax positions		1,129			1,730
Decreases related to prior year tax positions		(1,459	)		—
Unrecognized tax benefits at end of year	$	10,170		$	8,925

The Company’s policy is to recognize interest and penalties related to income taxes as components of interest expense and other expense, respectively. The Company did not accrue interest and penalties related to unrecognized tax benefits as of December 31, 2023 and does not anticipate any significant change within twelve months of this reporting date.

The Company’s valuation allowance increased by $8.1 million in the year ended December 31, 2023 and increased by $10.8 million in the year ended December 31, 2022.

As of December 31, 2023, the Company had federal and state net operating loss (“NOL”) carryforwards of $222.0 million and $204.4 million, respectively, which begin to expire in 2034. Of the total federal NOL carryforward of $222.0 million, approximately $196.4 million is carried forward indefinitely but is limited to 80% of the taxable income.

As of December 31, 2023, the Company had approximately $8.6 million and $8.1 million of U.S. federal and California research and development (“R&D”) credits, respectively. The federal R&D credits begin to expire in 2035 and the California R&D credits have an indefinite carryforward period.

The Company is subject to taxation in the United States for Federal and for State, within various states in which the Company operates. All jurisdictions and tax years currently remain open for IRS and state taxing authorities’ examination. As of December 31, 2023, the Company was not under examination by the Internal Revenue Service or any state tax jurisdiction.

Internal Revenue Code Section 382 ownership change generally occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules may apply under state tax laws. The Company is not aware of any ownership changes in this financial period ending on December 31, 2023.