INCOME TAXES

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Our losses before income taxes for the years ended December 31, 2022 and December 31, 2021 were generated entirely from U.S. operations.

We have no current or deferred provision for income taxes from continuing operations for the years ended December 31, 2022 and 2021.

The significant differences between the U.S. Federal statutory rate and our effective rate for financial reporting purposes are as follows:

	Years Ended December 31,
	2022		2021
Federal statutory tax rate	(21.0)	%	(21.0)	%
State taxed, net of federal tax benefit	(3.7)		(4.0)
Change in valuation allowance	14.3		23.9
Return-to-provision and other	7.9		1.3
Stock-based compensation	2.5		1.4
PPP loan forgiveness	—		(1.7)
Effective tax rate	—	%	—	%

Deferred income tax assets and liabilities consist of the following (in thousands):

	As of December 31,
	2022		2021
Deferred income tax assets:
Federal and state net operating loss carryovers	$	20,498	$	19,448
Capitalized research costs	432		—
Stock-based compensation	253		333
Compensation accruals and other	92		139
Operating leases related to ROU assets	89		130
Deferred revenue	11		—
Depreciation	8		—
Other	1		—
Total deferred income tax assets	21,384		20,050
Valuation allowance for deferred income tax assets	(21,298)		(19,916)
Deferred income tax assets, net of valuation allowance	86		134
Deferred income tax liabilities:
Depreciation	—		(7)
ROU assets	(86)		(127)
Total deferred income tax liabilities	(86)		(134)
Deferred income tax assets, net	$	—	$	—

A valuation allowance has been recognized to offset the net deferred tax assets as realization of such deferred tax assets have not met the more likely than not threshold.

As of December 31, 2022, we had federal and state net operating loss carryforwards of approximately $84.5 million and $71.0 million, respectively, not considering the IRC Section 382 annual limitation discussed below. The federal loss carryforwards begin to expire in 2029, unless previously utilized. In addition, we have approximately $40.1 million of the total $84.5 million of net operating losses that do not expire, as these losses were generated after the law change introduced as part of the Tax Cuts and Jobs Act. The state net operating losses expire if not utilized by 2042.

Additionally, the utilization of the net operating loss carryforwards could be subject to an annual limitation under Section 382 and 383 of the Internal Revenue Code of 1986, and similar state tax provisions due to ownership change limitations that have occurred previously or that could occur in the future. These ownership changes limit the amount of net operating loss carryforwards and other deferred tax assets that can be utilized to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382 and 383, results from transactions increasing ownership of certain stockholders or public groups in the stock of the corporation by more than 50 percentage points over a three-year period. We have not conducted an analysis of an ownership change under section 382. To the extent that a study is completed and an ownership change is deemed to occur, our net operating losses could be limited.

We do not have any unrecognized tax benefits at the beginning and end of the years ended December 31, 2022 and 2021, and do not expect a significant change in unrecognized tax benefits over the next 12 months.

We file income tax returns in the United States and Arizona with general statutes of limitations of three and four years, respectively. Due to net operating losses incurred, our tax returns from inception to date are subject to examination by taxing authorities. Our policy is to recognize interest expense and penalties related to income tax matters as a component of income tax expense. As of December 31, 2022, we had no interest or penalties accrued related to uncertain tax positions.