Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Note 11. Income taxes

The components of the Company's loss before income taxes were as follows (in thousands):

	Year ended December 31,
	2021			2020			2019
United States	$	(87,907	)	$	(76,849	)	$	(36,980	)
International		(2,038	)		—			—
Total	$	(89,945	)	$	(76,849	)	$	(36,980	)

The Company did not record a provision (benefit) for income taxes for the years ended December 31, 2021, 2020, and 2019.

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

	Year ended December 31,
	2021				2020				2019
Federal statutory income tax rate		21.00		%		21.00		%		21.00		%
State income taxes		0.96				0.55			-1.12
Income tax credits		2.17				2.14				3.67
Stock based compensation		1.68				0.44				(0.13	)
Non-deductible expenses and others		0.26				—				(0.25	)
Change in valuation allowance		(26.07	)			(24.13	)			(23.17	)
		—		%		—		%		—		%

As of December 31, 2021 and 2020, the components of the Company’s deferred tax assets are as follows (in thousands):

	Year ended December 31,
	2021			2020
Deferred tax asset:
Federal and State net operating loss carryforwards	$	44,933		$	28,072
Stock based compensation		6,853			2,633
Other accruals		396			566
Tax credits		6,737			3,928
Gross deferred tax asset		58,919			35,199
Valuation allowance		(58,611	)		(35,034	)
Total deferred tax assets		308			165
Deferred tax liabilities:
Property and equipment		(5	)		(14	)
Capitalized leases		(303	)		(151	)
Gross deferred tax liabilities		(308	)		(165	)
Net deferred tax assets	$	—		$	—

Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating losses and tax credit carryforwards.

The Company’s accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of its net deferred tax assets. The Company primarily considered such factors as its history of operating losses, the nature of the Company’s deferred tax assets, and the timing, likelihood and amount, if any, of future taxable income during the periods in which those temporary differences and carryforwards become deductible. At present, the Company does not believe that it is more likely than not that the deferred tax assets will be realized; accordingly, a full valuation allowance has been established and no deferred tax asset is shown in the accompanying balance sheets. The valuation allowance increased by approximately $23.6 million and $18.5 million and $8.5 million respectively for the years ended December 31, 2021, 2020, and 2019.

At December 31, 2021, the Company has federal net operating loss carryforwards of approximately $207.9 million of which $192.0 million will not expire and $15.8 million begin expiring in 2034. The Company also has state net operating loss carryforwards of approximately $16.3 million which begin to expire in 2034. Additionally, the Company has federal tax credits of approximately $8.0 million which begin to expire in 2036 and state tax credits of approximately $2.3 million which do not expire.

At December 31, 2021 and 2020, the Company had foreign net operating loss carryforwards of approximately $0.6 million and $0 million, respectively, which have no expiration date.

Use of the net operating loss and credit carryforwards may be subject to a substantial annual limitation due to the ownership change provisions of U.S. tax law and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before use.

Pursuant to the Internal Revenue Code, as amended (the “Code”) Sections 382 and 383, annual use of a company’s NOL and research and development credit carryforwards may be limited if there is a cumulative change in ownership of greater than 50% within a three-year period. The amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. If limited, the related tax asset would be removed from the deferred tax asset schedule with a corresponding reduction in the valuation allowance. The Company has completed such an analysis pursuant to Sections 382 and 383 through December 31, 2020 and determined there was a change in control with an immaterial impact on the NOL available to offset future taxable income. The Company has reviewed the shareholder activity for the year ended December 31, 2021 and believe that no additional limitations have occurred.

Uncertain Tax Positions

The Company follows the provisions of the FASB ASC 740-10, Accounting for Uncertainty in Income Taxes. ASC 740-10 prescribes a comprehensive model for the recognition, measurement, presentation and disclosure in the consolidated financial statements of uncertain tax positions that have been taken or expected to be taken on a tax return. No liability related to uncertain tax positions is recorded in the consolidated financial statements due to the fact the liabilities have been netted against deferred attribute carryovers. It is the Company’s policy to include penalties and interest related to income tax matters in income tax expense

The Company is subject to taxation in the United States and Australia. Because of the net operating loss and research credit carryforwards, all of the Company’s tax years, from 2013 to 2021, remain open to U.S. federal, California, other state tax, and Australia examinations. There were no interest or penalties accrued at December 31, 2021, 2020, and 2019. The Company does not expect that our uncertain tax positions will materially change in the next twelve months. The additional uncertain tax benefits would not impact our effective tax rate to the extent that we continue to maintain a full valuation allowance against our deferred tax assets.

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

	Year ended December 31,
	2021		2020		2019
Beginning balance	$	1,976	$	1,059	$	356
Additions for tax positions taken in a prior year		—		—		168
Additions for tax positions taken in a current year		1,273		917		535
Ending balance	$	3,249	$	1,976	$	1,059

On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") into law. The Company reviewed the aspects of this law as it relates to income taxes and concluded that the CARES Act did not have a material impact to the Company’s 2020 provision for income taxes.