Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes The Company did not record an income tax provision for both periods.

Reconciliation between the tax provision computed at the federal statutory income tax rate and the Company's actual effective income tax rate are as follows:

	Year Ended December 31,
	2021		2020
Federal statutory tax rate	21	%	21	%
R&D tax credit	2		1
Stock-based compensation and other permanent differences	—		—
Change in valuation allowance	(23)		(22)
Total	—	%	—	%

The Company’s income taxes are accounted for in accordance with authoritative guidance, which requires the use of the asset and liability method. Under this method, deferred income tax assets and liabilities are determined based upon the difference between the consolidated financial statement carrying amounts and the tax basis of assets and liabilities and are measured using the enacted tax rate expected to apply to taxable income in the years in which the differences are expected to be reversed.

Significant components of net deferred tax assets are as follows (in thousands):

	December 31,
	2021		2020
Deferred tax assets:
Net operating losses	$	52,832	$	42,331
Property and equipment	555		303
R&D tax credit	5,209		3,830
Stock-based compensation	717		490
Capitalized R&D expenses	6,268		3,109
Inventory	909		511
Lease liability	1,003		1,461
Accruals and reserves	1,418		1,144
Total deferred tax assets	68,911		53,179
Valuation allowance	(68,046)		(52,005)
Net deferred tax assets	865		1,174
Deferred tax liabilities:
Right-of-use assets	(865)		(1,174)
Total deferred tax liabilities	(865)		(1,174)
Net deferred tax assets	$	—	$	—

The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. Based on the Company's history of operating losses, the Company has concluded that it is more likely than not that the benefit of its deferred tax assets will not be realized. The valuation allowance increased by $16.0 million during the year ended December 31, 2021.

As of December 31, 2021 and 2020, the Company has U.S. federal net operating loss (“NOL”) carryforwards of approximately $215.0 million and $170.8 million, respectively, expiring beginning 2028. As of December 31, 2021 and 2020, the Company has U.S. state and local NOL carryforwards of approximately $123.5 million and $100.7 million, respectively, expiring beginning 2028.

As of December 31, 2021 and 2020, the Company has federal research and development credit carryforwards of approximately $4.2 million and $3.1 million, respectively, available to reduce future taxable income, if any. As of December 31, 2021 and 2020, the Company has California research and development credit carryforwards of approximately $3.4 million and $2.5 million, respectively, available to reduce future taxable income, if any.

The federal research and development credit carryforwards expire beginning 2028 and California research and development credit carryforwards are indefinite.

Internal Revenue Code section 382 places a limitation (the “Section 382 Limitation”) on the amount of taxable income that can be offset by net operating carryforwards after a change in control of a loss corporation. Generally, after a change in control, a loss corporation cannot deduct operating loss carryovers in excess of the Section 382 limitation. The Company has not performed an analysis to determine if a limitation applies and whether the limitation would cause the net operating losses to expire unutilized.

The Company files federal, state, and foreign income tax returns. The tax periods 2008 through 2021 remain open in most jurisdictions. In addition, any tax losses that were generated in prior years and carried forward may also be subject to examination by respective authorities. The Company is not currently under examination by federal, state or foreign income tax authorities.

In March 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was passed into law. The CARES Act includes several significant business tax provisions including modification to the taxable income limitation for utilization of NOLs incurred in 2020, 2019 and 2018, and the ability to carry back NOLs from those years for a period of up to five years, an increase to the limitation on deductibility of certain business interest expense, bonus depreciation for purchases of qualified improvement property and special deductions on certain corporate charitable contributions. The Company has analyzed the provision of the CARES Act and determined it did not have an impact on its consolidated financial statements due to the full valuation reserve.

A reconciliation of the change in the unrecognized tax benefit during the year is as follows (in thousands):

	December 31,
	2021		2020
Beginning of year	$	1,407	$	986
Additions for tax positions related to:
Current year	510		421
Prior years	—		—
End of year	$	1,917	$	1,407

As of December 31, 2021, the Company had a total of $1.9 million of gross unrecognized tax benefits, none of which would affect the effective tax rate upon realization. The Company currently has a full valuation allowance against its U.S. net deferred tax assets which would impact the timing of the effective tax rate benefit should any of these uncertain tax positions be favorably settled in the future.

The Company does not expect the unrecognized tax benefits to change significantly over the next 12 months. The Company will recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. As of December 31, 2021, the Company has not accrued interest or penalties related to uncertain tax positions.