Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of the Company’s federal income tax expense (benefit) are as follows:

	December 31, 2021		December 31, 2020
Current	$	—	$	—
Deferred	—		(84)
Income tax expense (benefit)	$	—	$	(84)

The following table presents a reconciliation of the tax expense (benefit) based on the statutory rate to the Company's actual tax expense (benefit) in the consolidated statements of operations:

	December 31, 2021		December 31, 2020
Statutory tax expense	$	(45,456)	$	(25,241)
Warrants – mark to market	545		14,552
Research and development tax credit	(1,555)		(1,170)
Change in valuation allowance	43,604		11,435
Other, net	2,862		340
Income tax expense (benefit)	$	—	$	(84)

The following table summarizes information regarding the Company's deferred tax assets, deferred tax liabilities and valuation allowance (in thousands):

	December 31, 2021		December 31, 2020
Deferred tax assets:
Net operating loss carryforwards	$	125,037	$	73,364
Tax credit carryforwards	7,388		4,780
Unearned premium reserves	662		103
Discounting of unpaid losses	631		167
Stock compensation	2,487		501
Other	324		1,048
Total deferred tax assets	136,529		79,963

Deferred tax liabilities:
Depreciation & Amortization	(6,507)		(3,691)
Total deferred tax liabilities	(6,507)		(3,691)
Net deferred tax assets before valuation allowance	130,022		76,272
Less valuation allowance	(130,022)		(76,272)
Balance end of year	$	—	$	—

Realization of deferred tax assets is dependent upon future taxable income, if any, the amount and timing of which are uncertain. The company is also in a cumulative loss position. Accordingly, net deferred tax assets have been fully offset by a valuation allowance.

As of December 31, 2021, the Company had federal and state net operating loss (“NOL”) carryforwards of approximately $475 million and $463 million, respectively. As of December 31, 2020, the Company had federal and state NOL carryforwards of approximately $279 million and $258 million, respectively. Of the Company’s NOLs, $142 million of federal losses will begin to expire in the years 2031 through 2041 and $334 million of losses can be carried forward indefinitely. State NOL’s have varying expiration periods, beginning from 2027 to 2040.

As of December 31, 2021, the Company had federal and state research and development tax credit carryforwards of approximately $5 million and $4 million, respectively. As of December 31, 2020, the Company had federal and state research and development tax credit carryforwards of approximately $4 million and $3 million, respectively. The federal tax credit carryforwards expire at various dates beginning in 2033 if not utilized. The state tax credit carryforwards do not expire.

In October 2016, the Company underwent a change of control under Section 382 of the Internal Revenue Code by the purchase of interest by additional investors. Accordingly, a portion of the Company’s deferred tax assets are subject to an annual limitation under Section 382. The deduction limitation is approximately $4 million in 2016, $12 million from 2017 to 2020, $9.5 million in 2021 and $4.2 million each following year. The annual deduction limitations apply to approximately $90.1 million of net operating losses and $4.2 million of research and development credits (grossed up for tax). The Company is not expected to lose any deferred tax assets as a result of these limitations. We may experience ownership changes in the future as a result of subsequent shift in our stock ownership.

Uncertain Tax Positions

The following is a reconciliation of the beginning and ending amount of the Company’s total gross unrecognized tax benefit liabilities (in thousands):

	December 31, 2021		December 31, 2020
Gross unrecognized tax benefit, beginning of the year	$	1,754	$	1,364
Increases related to tax positions taken during current year	519		390
Gross unrecognized tax benefit, ending balance	$	2,273	$	1,754

At December 31, 2021, all unrecognized tax benefits, if realized, would create additional deferred tax assets, which would be subject to a full valuation allowance. Accordingly, any recognition would not affect the Company's tax rate.

The Company does not anticipate any material reversals of unrecognized tax benefits in the next 12 months.

A number of the Company’s tax returns remain subject to examination by taxing authorities for tax years from 2011 to 2017 with respect to the amount of tax attribute carryovers only and 2018 and later under general statutes of limitation.

The Company is not currently under examination by income tax authorities in any federal or state jurisdictions.