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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes |
1 1. | Income Taxes
The components of the provision for income taxes for the years ended December 31, 2022 and 2021 consist of the following:
|  | Year Ended December 31, |
|  | 2022 |  |  | 2021 |
Current tax provision: |  |  |  |  |  |  |  |
Federal |  | $ | 341 |  |  | $ | — |
State |  |  | 7 |  |  |  | — |
Total tax provision |  | $ | 348 |  |  | $ | — |
The reconciliation of the federal statutory income tax rate to the Company’s effective tax rate for the years ended December 31, 2022 and 2021 are as follows:
|  | Year Ended December 31, |
|  | 2022 |  |  | 2021 |
Tax at statutory federal rate |  |  | -21.00 | % |  |  | -21.00 | %
State Tax (benefit)—net of federal benefit |  |  | -0.01 | % |  |  | 0.00 | %
Permanent differences |  |  | 1.00 | % |  |  | 0.35 | %
Tax credits |  |  | -42.08 | % |  |  | -5.86 | %
Derecognition due to Sec. 382 and 383 limitations |  |  | 139.00 | % |  |  | 0.00 | %
Change in valuation allowance |  |  | -69.24 | % |  |  | 26.26 | %
Fixed assets other adjustment |  |  | -1.19 | % |  |  | 0.00 | %
Other |  |  | -2.07 | % |  |  | 0.25 | %
Effective tax rate |  |  | 4.41 | % |  |  | 0.00 | %
Significant components of the Company’s deferred tax assets as of December 31, 2022 and 2021 consist of the following (in thousands):
|  | Year Ended December 31, |
|  | 2022 |  |  | 2021 |
Deferred tax assets: |  |  |  |  |  |  |  |
Accruals and reserves |  | $ | 1,273 |  |  | $ | 1,000 |
Net operating loss carry forwards |  |  | 40,770 |  |  |  | 47,541 |
Tax credit carry forwards |  |  | 4,463 |  |  |  | 12,939 |
Fixed and intangible assets |  |  | 9,510 |  |  |  | 3 |
Valuation allowance |  |  | (56,016 | ) |  |  | (61,483 | )
Net deferred tax assets: |  | $ | — |  |  | $ | — |
Based on the available objective evidence at December 31, 2022, the Company does not believe it is more likely than not that the net deferred tax assets will be realizable. Accordingly, the Company has provided a full valuation allowance against its net deferred tax assets at December 31, 2022 and 2021. The net valuation allowance decreased by approximately $5.5 million and increased by approximately $23.1 million during the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, after consideration of certain limitations (see below), the Company had approximately $194.1 million federal and $3.6 million state net operating loss carryforwards (“NOL”) available to reduce future taxable income which, if unused, will begin to expire in 2037 for federal and 2032 for state tax purposes. The federal net operating loss carryforward includes $192.4 million that have an indefinite life. As of December 31, 2022, the Company also had tax credit carry forwards available to offset future tax liabilities of approximately $8,500 for federal and $7.5 million for state. If unused, the federal credit will begin to expire in 2042 and the state tax credit does not expire. If the Company experiences a greater than 50 percent aggregate change in ownership over a three-year period (a Section 382 ownership change), utilization of its pre-change NOL carryforwards are subject to annual limitation under Section 382 of the Internal Revenue Code (California has similar provisions). The annual limitation is determined by multiplying the value of the Company’s stock at the time of such ownership change by the applicable long-term tax-exempt rate. Such limitations may result in expiration of a portion of the NOL carryforwards before utilization. The Company determined that ownership changes occurred on December 31, 2007, August 20, 2015, April 13, 2017, February 15, 2018, February 18, 2020, and December 26, 2022. Approximately $156.5 million and $75.2 million of the NOLs will expire unutilized for federal and California purposes, respectively. The Company has derecognized NOL related deferred tax assets in the tax affected amounts of $32.9 million and $0 for federal and California purposes, respectively through the year ended December 31, 2022. All of the federal R&D credits could expire unutilized, whereas none of the California R&D credits are subject to expiration. Approximately $26.1 million of gross federal R&D credit-related deferred tax assets were derecognized due to the Section 383 limitation. The ability of the Company to use its remaining NOL and carryforwards may be further limited if the Company experiences a Section 382 ownership change as a result of future changes in its stock ownership. On June 29, 2020, the California Governor signed Assembly Bill 85 (“A.B. 85”), which now becomes California law. A.B. 85, which includes several tax measures, provides for a three-year suspension of the use of net operating losses for medium and large businesses and a three-year cap on the use of business incentive tax credits to offset no more than $5 million of tax per year. Generally, A.B. 85 suspends the use of net operating losses for taxable years 2020, 2021, and 2022 for taxpayers with taxable income of $1 million or more. Since the Company is not expected to generate California source taxable income of more than $1 million, no material impact is anticipated at this time. Accounting for Uncertainty in Income Taxes The Company only recognizes tax benefits if it is more likely than not that they will be sustained upon audit by the relevant tax authority based upon their technical merits. An uncertain tax position will not be recognized if it has less than a 50% likelihood of being sustained. The Company had approximately $1.9 million and $4.7 million of unrecognized tax benefits as of December 31, 2022 and 2021, respectively. As the Company has a full valuation allowance on its deferred tax assets, the unrecognized tax benefits have reduced the deferred tax assets and the valuation allowance in the same amount. The Company does not expect the amount of unrecognized tax benefits to materially change in the next twelve months. A reconciliation of the beginning and ending balance of the unrecognized tax benefits is as follows (in thousands):
Beginning Balance at January 1, 2021 |  | $ | 2,955 |
Increase/(Decrease) of unrecognized tax benefits taken in prior years |  |  | — |
Increase/(Decrease) of unrecognized tax benefits related to current year |  |  | 1,749 |
Ending Balance at December 31, 2021 |  | $ | 4,704 |
Increase/(Decrease) of unrecognized tax benefits taken in prior years |  |  | (2,841 | )
Increase/(Decrease) of unrecognized tax benefits related to current year |  |  | 20 |
Ending Balance at December 31, 2022 |  | $ | 1,883 |
Interest and penalties related to unrecognized tax benefits would be included as income tax expense in the Company’s consolidated statements of operations. As of December 31, 2022 and 2021, the Company had not recognized any tax-related penalties or interest in its consolidated financial statements. The Company files income tax returns in the United States federal and California, with a new filing in Florida for tax year 2022. The Company filed final returns in 2021 in Kansas, Missouri and New Jersey state jurisdictions. The Company is not currently under examination by income tax authorities in federal, state or other jurisdictions. As of December 31, 2022 and 2021, the Company had no uncertain tax positions which affected its financial position as its results of operations or its cash flow, and will continue to evaluate for uncertain tax positions in the future. The Company is subject to United States federal and state income tax examinations by authorities for all tax years due to accumulated net operating losses that are being carried forward for tax purposes.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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