Income Taxes |
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Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | 12. Income Taxes The Company recorded no income tax benefit for the net loss incurred for the years ended December 31, 2021 and December 31, 2020, due to its uncertainty of realizing a benefit from such losses. All of the Company’s operating losses since inception have been generated in the United States. A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective tax rate is as follows:
Significant components of the Company’s deferred tax assets are included in the table below (in thousands):
The Company’s management has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, which are composed primarily of net operating loss (NOL) carryforwards and research and development credit carryforwards. Management has considered the Company’s history of net losses incurred since inception and probability of future losses to conclude it is more likely than not that the Company will not recognize the benefits of federal and state deferred tax assets. As a result, the Company has established a valuation allowance for the full amount of the net deferred tax assets as of December 31, 2021 and December 31, 2020. The valuation allowance increased by $13.2 million and $6.5. million during the years ended December 31, 2021 and December 31, 2020, respectively. As of December 31, 2021, the Company has $78.0 million of US federal NOLs and $80.2 million of Kentucky state NOL carryforwards that have no expiration dates. The Company has $0.1 million in US federal and state capital loss carryforwards that expire in . In addition, the Company had a US federal research and development tax credit carryforward of $2.4 million, which may be available to reduce future tax liabilities which start to expire in . Through December 31, 2021, the Company has generated research and development tax credits but has not conducted a study to document the qualified activities. Such study may result in an adjustment to the Company’s research and development credit carryforwards. Since a full valuation allowance has been provided against the Company’s research and development credits, any reduction in the gross deferred tax asset established for the research and development credit carryforwards would not result in any net impact to the Company’s financial statements. Realization of the future tax benefits is dependent on many factors, including the Company’s ability to generate taxable income within the NOL carryforward period. Under the provisions of Sections 382 and 383 of the Internal Revenue Code ("IRC"), and corresponding provisions of state law, certain substantial changes in the Company’s ownership, including a sale of the Company or significant changes in ownership due to sales of equity, may have limited, or may limit in the future, the amount of NOL carryforwards, which could be used annually to offset future taxable income. No study has been completed as of the date of these financial statements to determine whether a change in control, as defined by Section 382 of the IRC, has occurred. If it is determined the Company has experienced a change in control at any time since inception, realization of the NOL carryforwards or research and development tax credit carryforwards may be subject to an annual limitation. Any limitation may result in the expiration of a portion of NOL or research and development tax credit carryforwards before they are realized. The Company files US federal and state tax returns in the United States. All tax years since incorporation remain open to examination by the major taxing jurisdictions (state and federal) to which the Company is subject, as carryforward attributes generated in years past may still be adjusted upon examination by the Internal Revenue Service (IRS) or other authorities if they have or will be used in a future period. The Company is not currently under examination by the IRS or any other jurisdictions for any tax year. |