Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

14. Income Taxes

For the years ended December 31, 2021 and 2020, the Company recognized a provision for income taxes of $49,000 and zero, respectively.

The difference between income taxes computed using the U.S. federal income effective tax rate and the provision for income taxes is as follows (in thousands):

	Year Ended December 31,
	2021			2020
Federal statutory rate	$	4,139		$	(8,278	)
State tax benefit		812			(1,740	)
Change in valuation allowance		(288	)		787
Tetraphase net operating losses and other adjustments		(4,670	)		-
Share-based compensation expense		565			9,072
State rate true-up		(369	)		291
Research and development credits		-			(173	)
Other permanent differences		(140	)		41
Provision for income taxes	$	49		$	-

Deferred tax assets are as follows (in thousands):

	December 31,
	2021			2020
Deferred tax assets:
Net operating loss carryforwards	$	84,571		$	84,827
Research and development credits		24,015			24,179
Deferred royalty obligation		36,687			36,265
Share-based compensation expense		2,742			2,497
Depreciation and amortization expense		482			1,044
Lease liability		80			136
Capital loss carryforward		126			-
Other		337			436
Total gross deferred tax assets		149,040			149,384
Deferred tax liabilities:
Right-of-use lease asset		(80	)		(136	)
Valuation allowance		(148,960	)		(149,248	)
Net deferred tax assets	$	-		$	-

As of December 31, 2021 and 2020, the Company established a full valuation allowance against its federal and state deferred tax assets due to the uncertainty surrounding the realization of such assets.

Pursuant to Section 382 and 383 of the IRC, utilization of the Company’s federal net operating loss (“NOL”) carryforwards and research and development credit carryforwards may be subject to annual limitations in the event of any significant changes in its ownership structure. These annual limitations may result in the expiration of net operating loss carryforwards and research and development credit carryforwards, unless utilized. The federal and state net operating loss carryforwards and federal and state research and development carryforwards have been adjusted to reflect the Company’s estimate of the annual limitations under IRC Section 382 and 383.

As of December 31, 2021, the Company had federal and state net operating loss carryforwards of $327.2 million and $245.1 million, respectively. In addition, the Company had estimated federal and state research and development credit carryforwards of $10.8 million and $16.7 million, respectively. Federal net operating loss carryforwards of $158.7 million, state net operating loss carryforwards of $210.6 million, federal research and development credit carryforwards of $10.8 million will begin to expire in 2026, unless utilized. Federal net operating loss carryforwards of $168.5 million, state net operating loss carryforwards of $34.5 million and California research and development credit carryforwards of $16.7 million will carry forward indefinitely, unless utilized.

There were no unrecognized tax benefits as of December 31, 2021 and 2020. The Company does not anticipate there will be a significant change in unrecognized tax benefits within the next 12 months.

The Company had no accrual for interest or penalties related to income taxes on the Company’s consolidated balance sheets as of December 31, 2021 or December 31, 2020, and has not recognized interest and/or penalties related to income taxes in the consolidated statements of operations for the years ended December 31, 2021 and 2020.

The Company is subject to taxation in the U.S. and various state jurisdictions. The Company’s tax returns since inception are subject to examination by the U.S. and various state tax authorities. The Company is not currently undergoing a tax audit in any federal or state jurisdiction.