Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 12. Income Taxes

For financial reporting purposes, loss before income taxes includes the following components:

	Years Ended December 31,
	2022			2021
United States	$	(19,914	)	$	(19,601	)
Foreign		—			—
Total	$	(19,914	)	$	(19,601	)

The provision for income taxes for the years ended December 31, 2022 and 2021 consisted of the following:

	Year Ended December 31,
	2022		2021
Current income tax expense (benefit)
Federal	$	—	$	—
State		—		—
Foreign		—		—
Total current		—		—
Deferred income tax (benefit)
Federal		—		—
State		—		—
Foreign		—		—
Total deferred		—		—
Total provision	$	—	$	—

A reconciliation of the income tax provision computed using the U.S. statutory federal income tax rate compared to the income tax provision included in the statements of operations is as follows:

	Year Ended December 31,
	2022			2021
Tax at U.S. statutory rate on income before income    taxes	$	(4,182	)	$	(4,116	)
Change in valuation allowance		3,317			3,930
State taxes		(369	)		(684	)
Section 162(m)		363			310
Stock-based compensation		170			559
Deferred adjustment		706			—
Other		(5	)		1
Total	$	—		$	—

Deferred tax assets and liabilities are determined based on the differences between financial reporting and income tax bases of assets and liabilities, as well as net operating loss carryforwards, and are measured using the enacted tax rates and laws in effect when the differences are expected to reverse. The significant components of the Company’s net deferred tax assets and liabilities are as follows:

	Year Ended December 31,
	2022			2021
Deferred tax assets:
Net operating loss carryforwards	$	5,855		$	4,417
Intangible assets		5,866			6,287
Capitalization of research and experimentation expenses		2,533			—
Stock-based compensation		1,150			1,675
Fixed assets		272			—
Other		658			639
Total deferred tax assets		16,334			13,018
Valuation allowance		(16,331	)		(13,014	)
Total deferred tax assets, net of valuation allowance		3			4
Deferred tax liabilities:
Other		(3	)		(4	)
Total deferred tax liabilities		(3	)		(4	)
Net deferred tax assets	$	—		$	—

The deferred tax assets associated with net operating losses included in the table above for the years ended December 31, 2022 and 2021 reflect the net operating losses the Company expects to generate on its federal and state income tax returns.

As of December 31, 2022 and 2021, the Company maintained federal net operating loss carryforwards of $23,985 and $17,965, respectively. As of December 31, 2022 and 2021, the Company also maintained state net operating loss carryforwards of $16,974 and $12,786, respectively. The federal net operating losses generated during years ended December 31, 2022 and 2021 may only be utilized to offset 80% of taxable income annually and may be carried forward indefinitely. The state net operating losses will begin to expire in the year 2028 if not utilized, though certain state losses can be carried forward indefinitely.

As of December 31, 2022, the Company determined that it continued to be more likely than not that its net deferred tax assets would not be realized in the near future and maintained a $16,331 valuation allowance against these deferred tax assets. The net change in total valuation allowance between the years ended December 31, 2022 and 2021, was an increase of $3,317. The Company’s designation was based on its review and analysis of all the available evidence as of the balance sheet date, both positive and negative.

The uncertainty provisions of ASC 740 also require the Company to recognize the impact of a tax position in its consolidated financial statements only if the technical merits of that position indicate that the position is more likely than not of being sustained upon audit. During the years ended December 31, 2022 and 2021, the Company did not record a reserve for uncertain tax positions.

The Company’s income tax returns for periods separate from the consolidation with PDL are subject to examination by U.S. federal, state and local tax authorities for tax years 2020 forward. The Company's separate state and local tax returns are generally not subject to examination by authorities for tax years prior to 2017; however, as we utilize our net operating losses, prior years can be subject to examination from 2011 forward. The Company is not currently under examination in any significant tax jurisdictions. Interest and penalties associated with unrecognized tax benefits accrued on the balance sheet were $0 as of December 31, 2022 and 2021.

The 2017 Tax Cuts and Jobs Act requires taxpayers to capitalize research and experimental (“R&E”) expenditures effective for taxable years beginning after December 31, 2021. R&E expenditures attributable to U.S.-based research must be amortized over a period of 5 years and R&E expenditures attributable to research conducted outside of the U.S. must be amortized over a period of 15 years.

In August 2022, two pieces of U.S. tax legislation that have significant tax-related provisions were signed into law: (1) the Creating Helpful Incentives to Produce Semiconductors Act of 2022 (the “CHIPS Act”), which creates a new advanced manufacturing investment credit under new Internal Revenue Code Section 48D, and (2) the Inflation Reduction Act of 2022 (the “IRA”), which has a number of tax-related provisions, including: (a) a 15 percent book minimum tax on “adjusted financial statement income of applicable corporations,” (b) a plethora of clean energy tax incentives in the form of tax credits, and (c) a one percent excise tax on certain corporate stock buybacks. The Company will monitor additional guidance and impact that the CHIPs Act, the IRA and other potential legislation may have on its income taxes. For the period ended December 31, 2022, the Company does not believe the provisions from these legislative updates will have a material impact on the Company's income taxes.