Income taxes

12 Months Ended

Dec. 31, 2021

Income taxes

Income Taxes

7. Income taxes

Components of income taxes consist of the following:

	Year ended December 31,
	2021		2020		2019
Foreign	$	(13,229,828)	$	(27,215,385)	$	(25,268,373)
Domestic		(23,897,475)		(26,263,427)		(2,791,434)
Net loss	$	(37,127,303)	$	(53,478,812)	$	(28,059,807)

A reconciliation of the effect of applying the federal statutory rate to the net loss and the effective income tax rate:

	Year ended December 31,
	2021		2020		2019
Statutory federal income tax rate	21.0	%	21.0	%	21.0	%
Earnings in jurisdictions taxed at rates different from the statutory U.S. federal tax rate	(0.1)	%	0.2	%	0.4	%
Permanent differences	—	%	1.7	%	3.7	%
Changes in valuation allowance	(18.2)	%	(22.5)	%	(25.1)	%
Other	(2.7)	%	(0.4)	%	—	%
Effective income tax rate	—	%	—	%	—	%

Significant components of the Company’s deferred taxes as of December 31, 2021 and 2020 are as follows:

	December 31,
	2021		2020
Deferred tax assets:
Net operating loss carryforward	$	38,773,870	$	32,183,004
Stock compensation		3,341,338		1,358,554
Lease liability		47,677		70,192
Gross deferred tax assets		42,162,885		33,611,750
Valuation allowance		(42,115,543)		(33,541,533)
Total deferred tax assets		47,342		70,217
Deferred tax liabilities:
Fixed assets		(818)		(1,130)
Right of use asset		(46,524)		(69,087)
Total deferred tax liabilities		(47,342)		(70,217)
Net deferred tax assets (liabilities)	$	—	$	—

The Company has no income tax expense due to operating losses incurred for the years ended December 31, 2021, 2020 and 2019, respectively. The Company has provided a valuation allowance for the full amount of the net deferred tax assets as, based on all available evidence, it is considered more likely than not that all the recorded deferred tax assets will not be realized in a future period. At December 31, 2021, the Company has $126.9 million, $45.6 million, and $45.2 million of foreign, federal and state net operating loss carryforwards, respectively, that expire at various dates through 2037. Certain of these foreign, federal and state net operating loss carryforwards may be subject to Internal Revenue Code Section 382 or similar provisions, which impose limitations on their utilization.

The valuation allowance increased in 2021 and 2019 by $8.6 million and $13.9 million, respectively due to the increase in the deferred tax assets by the same amounts; primarily due to net operating loss carryforwards. Realization of the future tax benefits is dependent on many factors, including the Company’s ability to generate taxable income within the net operating loss carryforward period. Under the provisions of the U.S. Internal Revenue Code and Sweden tax law, certain changes in the Company’s ownership, including a sale of the Company or significant changes in ownership due to sales of equity, may have limited, or may limit in the future, the amount of net operating loss carryforwards that could be used annually to offset future taxable income. For U.S. and Swedish income tax purposes, the Company has not completed a study to assess whether a change of control has occurred or whether there have been changes of control since the Company’s formation due to the complexity and cost associated with such study and because there could be additional changes in control in the future. As a result, the Company is not able to estimate the effect of the change in control, if any, on the Company’s ability to utilize U.S. or Swedish net operating losses or other tax attribute carryforwards in the future. For Swedish income tax purposes, the Company’s net operating losses may be subject to limitations in accordance with the country’s group contribution restriction laws.

The Company files tax returns in Sweden, the United States and Massachusetts. Income tax returns prior to 2018 in the United States and Massachusetts are no longer subject to examination and income tax returns prior to 2015 are no longer

subject to examination in Sweden. The Company is not currently under examination by the IRS or any other jurisdictions for any tax years.

In June 2018, Sweden passed laws on changes to the Swedish regulations on corporate income taxation. The law applies from January 1, 2019. Among other things, the changes decrease the corporate income tax rate in two steps from 22% to 21.4% as of January 1, 2019 and 20.6% as of January 1, 2020. U.S. GAAP requires companies to revalue their deferred tax assets and deferred tax liabilities as of the date of enactment, with the resulting tax effects accounted for in the reporting period of enactment. The Company previously accounted for the change in rate in 2020 which resulted in offsetting changes to tax expense and the valuation allowance.

As tax law is complex and often subject to varied interpretations, it is uncertain whether some of the Company’s tax positions will be sustained upon examination. Tax liabilities associated with uncertain tax positions represent unrecognized tax benefits, which arise when the estimated benefit recorded in the Company’s financial statements differs from the amounts taken or expected to be taken in a tax return because of the uncertainties described above. Substantially all of these unrecognized tax benefits, if recognized, would benefit the Company’s effective income tax rate.

As of December 31, 2021 and 2020, the Company had approximately $0.1 million and $0.8 million of liabilities, respectively, related to uncertain tax positions. The Company had no uncertain tax positions as of December 31, 2019. As the Company’s uncertain tax positions can be offset by available net operating losses, the Company did not recognize interest and penalties for 2021, 2020 and 2019.

On March 27, 2020, the U.S government enacted the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) under which several restrictions for income tax purposes were relaxed, including with respect to, the limitations on business interest expense deductions, the ability to use net operating losses, and the acceleration of alternative minimum tax credits. Given the Company’s history of losses, the CARES Act did not have a material impact on income taxes.