Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 10. Income taxes

For the year ended December 31, 2022, the Company recorded an income tax expense of $0.1 million. The Company did not record an income tax provision for the years ended December 31, 2021 and 2020 due to its history of operating losses. All loss before income taxes was generated in the United States for the years ended December 31, 2022, 2021 and 2020.

Reconciliation of the statutory federal income tax to the Company’s effective tax is as follows:

	December 31,
	2022			2021			2020
	(in thousands)
Income tax provision at statutory rate	$	(33,011	)	$	(33,128	)	$	(8,370	)
State income taxes, net of federal benefit		(3,280	)		(3,104	)		(826	)
Change in valuation allowance		22,731			37,792			8,720
Stock-based compensation		101			(716	)		(621	)
Convertible debt		9,556			—			—
Research and development tax credits		2,439			(1,210	)		(1,442	)
Change in fair value of warrants		10			21			326
Derivative liability and extinguishment of debt		—			—			545
Return-to-provision adjustments		318			308			1,261
Other		1,236			37			407
Total current income tax provision	$	100		$	—		$	—

The tax effects of temporary differences and carryforwards that give rise to significant portions of deferred tax assets are as follows:

	December 31,
	2022			2021			2020
	(in thousands)
Deferred tax assets:
Net operating loss carryforwards	$	91,036		$	62,322		$	35,943
Research and development credits		3,077			5,120			3,910
Accruals and reserves		3,067			13,597			2,986
Lease liability		1,574			1,690			—
Stock-based compensation		2,559			565			589
Interest expense carryforward		60			—			—
Research and development capitalization		3,695			—			—
Total deferred tax assets		105,068			83,294			43,428
Valuation allowance		(102,957	)		(80,226	)		(42,435	)
Deferred tax assets after valuation allowance		2,111			3,068			993
Deferred tax liabilities:
Depreciation and amortization		(736	)		(1,429	)		(993	)
Right-of-use asset		(1,375	)		(1,639	)		—
Total deferred tax liabilities		(2,111	)		(3,068	)		(993	)
Net deferred tax assets	$	—		$	—		$	—

Due to the uncertainties surrounding the realization of deferred assets through future income, the Company has established a full valuation allowance against its deferred tax assets and, therefore, no benefit has been recognized for the net operating loss and other deferred tax assets. The valuation allowance increased by $22.7 million, $37.8 million, and $8.7 million during the years ending December 31, 2022, 2021, and 2020.

Under the Tax Cuts and Jobs Act of 2017, research and development costs are no longer fully deductible and are required to be capitalized and amortized for U.S. tax purposes, effective January 1, 2022. The mandatory capitalization requirement increases the Company’s deferred tax assets offset by a full valuation allowance.

As of December 31, 2022, the Company had federal net operating loss carryforwards of approximately $374.7 million, of which $26.7 million begin to expire in the year 2030 and $348.0 million will carry over indefinitely. The Company also has state net operating loss carryovers of approximately $156.1 million available to reduce future taxable income, if any. The state carryforwards begin to expire beginning in the year 2030.

As of December 31, 2022, the Company had research and development credits carryovers for federal income tax purposes of approximately $0.1 million which expire beginning in the year 2031. The Company also has state research and development credit carryforwards of approximately $4.3 million as of December 31, 2022, which do not expire.

Utilization of the net operating loss and credit carryforwards will be subject to an annual limitation due to the ownership percentage change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of the net operating loss carryforwards before utilization. In the event the Company has had a change of ownership, utilization of the carryforwards could be restricted. The Company’s net operating loss deferred tax asset was reduced from the prior year as a result of limitation on the utilization of net operating loss carryforwards subject to the Internal Revenue Code Section 382.

Uncertain tax positions

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:

	December 31,
	2022			2021		2020
	(in thousands)
Beginning balance	$	2,194		$	1,676	$	1,058
Increases (decreases) related to current year tax positions		(875	)		518		618
Ending balance	$	1,319		$	2,194	$	1,676

If recognized, gross unrecognized tax benefits would not have an impact on the Company’s effective tax rate due to the Company’s full valuation allowance position. While it is often difficult to predict the final outcome of any particular uncertain tax position, the Company does not believe that the amount of gross unrecognized tax benefits will change significantly in the next twelve months.

The Company’s income tax returns for all tax years remain open to examination by federal and state taxing authorities due to the taxing authorities’ ability to adjust operating loss carryforwards.

The Company has elected to recognize interest and penalties related to uncertain tax positions as a component of the income tax provision. No such expenses were incurred in the years ended December 31, 2022, 2021 and 2020. The Company has not made any accruals for payment of interest related to unrecognized tax benefits.