Income Taxes

12 Months Ended

Dec. 31, 2021

Income Taxes

Income Taxes

Note 10 - Income Taxes

The Company has accumulated net losses since inception and has not recorded an income tax provision or benefit during the years ended December 31, 2021 and 2020.

A reconciliation of the statutory U.S. federal rate to the Company’s effective tax rate is as follows:

	For the year ended December 31,
	2021		2020
Statutory federal income tax rate	21	%	21	%
State taxes, net of federal tax benefit	16	%	16	%
Non-deductible items	(1)	%	(1)	%
Credits	5	%	4	%
Federal tax rate change	—	%	—	%
State tax rate change	—	%	1	%
Other	—	%	—	%
Change in valuation allowance	(41)	%	(41)	%
Income taxes provision (benefit)	—		—

The components of the net deferred tax asset as of December 31, 2021 and 2020 are the following ($ in thousands):

	For the year ended December 31,
	2021		2020
Deferred tax assets:
Net operating loss carryovers	$	66,879	$	45,090
Stock compensation and other		2,702		2,444
Change in fair value of warrant liabilities		59		59
Amortization of license		13,977		12,804
Lease liability		755		825
Accruals and reserves		1,035		504
Startup costs		6		7
Tax credits		9,728		5,743
Total deferred tax assets		95,141		67,476
Less: valuation allowance		(94,751)		(67,073)
Net deferred tax assets	$	390	$	403
Deferred tax liabilities:
Right of use asset		(390)		(403)
Total deferred tax assets, net	$	—	$	—

The Company has determined, based upon available evidence, that it is more likely than not that the net deferred tax asset will not be realized and, accordingly, has provided a full valuation allowance against its net deferred tax assets as of December 31, 2021 and 2020. A valuation allowance of approximately $94.8 million and $67.1 million, respectively, was recorded for the years ended December 31, 2021 and 2020.

As of December 31, 2021, the Company had federal and state net operating loss carryforwards of approximately $191.7 million and $410.0 million, respectively. Approximately $168.1 million and $94,000 of the federal and state net operating loss carryforwards, respectively, can be carried forward indefinitely. As of December 31, 2021, the Company had federal and state income tax credits of approximately $8.3 million and $1.8 million, respectively, which will begin to expire in 2033. Under the provisions of Section 382 of the Internal Revenue Code, a corporation that undergoes an “ownership change”, as defined therein, is subject to limitations on its use of pre-change NOLs and income tax credits carryforwards

to offset future tax liabilities. Certain tax attributes may be subject to an annual limitation as a result of the Company’s January 2017 capital raise, as it appears to constitute an ownership change under Section 382. The Company has recorded a full valuation allowance on all of its deferred tax assets as it believes that it is more likely than not that the deferred tax assets will not be realized regardless of whether an “ownership change” has occurred.

There are no significant items determined to be unrecognized tax benefits taken or expected to be taken in a tax return, in accordance with ASC 740 “Income Taxes” (“ASC 740”), which clarifies the accounting for uncertainty in income taxes recognized in the financial statements, that have been recorded on the Company’s financial statements for the periods ended December 31, 2021 and 2020. The Company does not anticipate a material change to unrecognized tax benefits in the next twelve months.

Additionally, ASC 740 provides guidance on the recognition of interest and penalties related to income taxes. There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the periods ended December 31, 2021 and 2020.

The company is subject to U.S. federal and various state taxes. As of December 31, 2021, the earliest federal tax year open for the assessment of income taxes under the applicable statutes of limitations is its 2018 tax year.

In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was signed into law on March 27, 2020. The CARES Act, among other things, includes tax provisions relating to refundable payroll tax credits, deferment of employer's social security payments, net operating loss utilization and carryback periods and modifications to the net interest deduction limitations. The CARES Act did not have a material impact on the Company’s income tax provision for 2021. The Company will continue to evaluate the impact of the CARES Act on its financial position, results of operations and cash flows.

On December 27, 2020, the President of the United States signed the Consolidated Appropriations Act, 2021 (“Consolidated Appropriations Act”) into law. The Consolidated Appropriations Act is intended to enhance and expand certain provisions of the CARES Act, allows for the deductions of expenses related to the Payroll Protection Program funds received by companies, and provides an update to meals and entertainment expensing for 2021. The Consolidated Appropriations Act did not have a material impact to the Company’s income tax provision for 2021.