Income Taxes

6 Months Ended

12 Months Ended

Jun. 30, 2022

Dec. 31, 2021

Income Taxes

9. INCOME TAXES

The Company had no income tax expense as a result of the continued generation of NOLs offset by a full valuation allowance recorded on such NOLs, as the Company determined it is not more-likely-than-not that its NOLs will be utilized.

10. INCOME TAXES

The Company did not file separate tax returns as they were included in the consolidated tax reporting of the Parent entity, within the respective entity’s tax jurisdiction. Accordingly, the income tax provision included in these carve out financial statements was calculated using a method consistent with a separate return basis, as if the Company had been a separate taxpayer.

The components of loss before income taxes for the years ended December 31, 2021 and 2020 were as follows:

	2021			2020
U.S.	$	(9,896	)	$	(7,623	)

For the years ended December 31, 2021 and 2020, there was no provision (benefit) for income taxes.

The effective tax rate of the Company’s provision (benefit) for income taxes differs from the federal statutory rate as follows for the years ended December 31:

	2021			2020
Statutory rate		21.00	%		21.00	%
State tax		7.14	%		7.33	%
Tax credits		0.40	%		0.44	%
Valuation allowance		(27.48	%)		(28.41	%)
Other		(1.06	%)		(0.36	%)
		0.00	%		0.00	%

Significant components of the Company’s net deferred taxes were as follows as of December 31:

	2021			2020
Deferred tax assets:
Net operating loss carryforwards	$	17,646		$	16,296
Accruals, reserves and others		757			198
Tax credits		1,900			1,807
Capitalized R&D		479			—
Total deferred tax assets		20,782			18,301
Deferred tax liabilities:
Property and equipment		(85	)		(323	)
Total deferred tax liabilities		(85	)		(323	)
Less: valuation allowance		20,697			17,978
Net deferred taxes	$	—		$	—

In assessing the realizability of deferred tax assets, management considers whether it is more-likely-than-not that some portion or all the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences will become deductible. The Company assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence is the cumulative losses incurred since inception supported by negative subjective evidence of no expectations of future taxable income. Based on this evaluation, as of December 31, 2021, and 2020, the Company determined that its federal and state net deferred tax assets of approximately $20,697 and $17,978, respectively, are subject to a full valuation allowance, as it is more-likely-than-not that the net deferred tax assets will not be realized. The net change in total valuation allowance is an increase of $2,719 and $2,165 for the years ended December 31, 2021, and 2020, respectively.

Net operating losses and tax credit carryforwards were as follows as of December 31, 2021:

	Amount		Expiration Years
Net operating losses, federal (Post December 31, 2017)	$	24,759		Do Not Expire
Net operating losses, federal (Pre January 1, 2018)	$	38,999		2028-2037
Net operating losses, state	$	60,962		2029-2041
Tax credits, federal	$	1,396		2034-2041
Tax credits, state	$	1,440		N/A

Utilization of net operating losses and tax credit carryforwards are subject to certain limitations under Section 382 of the Internal Revenue Code of 1986, as amended, in the event of a change in the Company’s ownership, as defined in current income tax regulations. Federal and state laws impose substantial restrictions on the utilization of net operating loss and tax credit carryforwards in the event of an ownership change for tax purposes, as defined in Section 382 of the Internal Revenue Code. As a result of such ownership changes, the annual limitation may result in the expiration of net operating losses and credits before utilization. The Company and its Parent performed a Section 382 analysis through March 15, 2021. The Company and its Parent have experienced ownership changes in the past. The ownership changes will not result in a limitation that will materially reduce the total amount of net operating loss carryforwards and credits that can be utilized. Subsequent ownership changes may affect the limitation in future years.

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

January 1, 2020	$	648
Additions based on tax positions related to 2020		26
Additions for tax positions of prior years		—
December 31, 2020		674
Additions based on tax positions related to 2021		35
Additions for tax positions of prior years		—
December 31, 2021	$	709

The entire amount of the unrecognized tax benefits would not impact the Company’s effective tax rate if recognized and there would be no cash tax impact. The Company has elected to include interest and penalties as a component of tax expense. For the years ended December 31, 2021 and 2020, the Company did not recognize accrued interest and penalties related to unrecognized tax benefits. The Company does not anticipate that the amount of existing unrecognized tax benefits will significantly increase or decrease during the next 12 months.

The Parent files income tax returns in the U.S. federal and California tax jurisdictions. The federal and state income tax returns from inception to December 31, 2021 remain subject to examination.