Income Taxes

12 Months Ended

Dec. 31, 2021

Income Taxes [Abstract]

Income Taxes

6. Income Taxes

Loss before income taxes consisted of the following components:

	Year Ended December 31,
	2021		2020
United States	$	(21,714,000)	$	(21,583,000)
Foreign		(1,441,000)		(598,000)
Total	$	(23,155,000)	$	(22,181,000)

The company has not recognized any current or deferred tax expense on its US and Foreign pre-tax losses for the years ended December 31, 2021 and 2020.

The differences between the Company’s effective tax rate and the U.S. federal statutory tax rate were as follows:

	December 31,
	2021		2020
U.S. federal statutory income tax rate	21.0	%	21.0	%
Adjustments for tax effects of:
State income taxes, net of federal tax	6.2	%	6.6	%
Stock-based compensation	(0.8)	%	(0.7)	%
Change in valuation allowance	(27.2)	%	(28.5)	%
Other	0.8	%	1.6	%
Effective income tax rate	0.0	%	0.0	%

Significant components of the Company’s deferred tax assets and liabilities were as follows:

	December 31,
	2021		2020
Deferred tax assets:
Net operating loss carryforwards	$	36,405,000	$	31,243,000
Capitalized research and development		16,306,000		15,789,000
Stock-based compensation		2,467,000		2,087,000
Depreciation and amortization		1,301,000		1,405,000
Lease accounting		10,631,000		3,478,000
Other		1,174,000		989,000
Total deferred tax assets before valuation allowance		68,284,000		54,991,000
Less: valuation allowance		(58,251,000)		(51,972,000)
Total deferred tax assets after valuation allowance		10,033,000		3,019,000
Deferred tax liabilities:
Right-of-use asset		(10,033,000)		(3,019,000)
In-process research and development		(3,077,000)		(3,077,000)
Total deferred tax liabilities		(13,110,000)		(6,096,000)
Net deferred tax liability	$	(3,077,000)	$	(3,077,000)

The Company’s net operating loss carryforwards at December 31, 2021 are $128.4 million and $94.4 million for federal and state income tax purposes, respectively. Federal and state net operating loss carryforwards are available to offset future taxable income, if any, and will begin to expire in 2026 to 2028, respectively. The federal NOL’s generated in tax years 2018 and forward will carryforward indefinitely.

The ability of the Company to utilize net operating loss carryforwards to reduce future domestic taxable income and domestic income tax is subject to various limitations under the Internal Revenue Code (Code). The utilization of such

carryforwards may be limited upon the occurrence of certain ownership changes during any three-year period resulting in an aggregate change of more than 50% in beneficial ownership. The Company previously determined an ownership change occurred on May 9, 2019 as a result of the Merger. The resulting limitation significantly reduced the Company’s ability to utilize its net operating loss and credit carryovers before the expire. Accordingly, in 2019 the Company reduced its deferred tax assets for the net operating loss and credit carryforwards that were expected to expire unused with a corresponding offset to the valuation allowance recorded against such assets. Future ownership changes under Section 382 may also limit the Company’s ability to fully utilize any remaining tax benefits.

The Company has generated federal and state income tax losses in all years since its inception. Accordingly, management has determined that significant negative evidence precludes the Company from recording a net deferred tax asset for financial statement purposes as it is more likely than not that its deferred tax assets will not be realized.

The Company files income tax returns in the U.S. federal jurisdiction, state of California and certain foreign jurisdictions. As of December 31, 2021, the Company is no longer subject to U.S. federal income tax examinations for tax years ended on or before December 31, 2017 or to California state income tax examinations for tax years ended on or before December 31, 2016. However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses or tax credits were generated and carried forward, and make adjustments up to the amount of the net operating loss or credit carryforward.

The Company did not have a liability for unrecognized tax benefits at December 31, 2021 and 2020.

The Company’s policy is to classify interest and penalties on uncertain tax positions as a component of tax expense. As of December 31, 2021, the Company has no accrued interest or penalties related to uncertain tax positions.