XML 35 R15.htm IDEA: XBRL DOCUMENT v3.22.4
Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Taxes [Abstract]  
Income Taxes 9. Income Taxes

The Company did not provide for income taxes during the periods presented because it had book and federal taxable losses in those years and the tax benefit that would have resulted from the pre-tax losses was fully offset by a change in the valuation allowance.

The reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for periods presented was as follows:

Year ended December 31,

2022

2021

2020

Tax at federal statutory rate

21.0

%

21.0

%

21.0

%

State tax, net of federal benefit

—

—

—

Share-based compensation

(0.5)

1.2

(42.8)

Research and development credits

4.9

2.3

1.6

Section 162(m) limitation

(0.2)

(0.5)

—

Other

(1.8)

(0.2)

—

Change in valuation allowance

(23.4)

(23.8)

20.2

Effective income tax rate

—

%

—

%

—

%

Deferred tax assets and valuation allowance

Deferred tax assets reflect the tax effects of net operating loss and tax credit carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company’s deferred taxes assets at December 31, 2022 and 2021 were valued at the corporate tax rate of 21%. The Company offsets its deferred tax assets by a valuation allowance because it is uncertain about the timing and amount of any future profits. Significant components of its deferred tax assets are as follows (in thousands):

December 31,

2022

2021

Deferred tax assets:

Net operating loss carryforwards

$

28,017

$

24,777

Share-based compensation

2,706

2,870

Research and development credit carryforwards

9,681

7,439

Capitalized research and development expenses

12,690

—

Other

934

1,130

Total deferred tax assets

54,028

36,216

Valuation allowance

(54,002)

(36,166)

Net deferred tax assets

26

50

Deferred tax liabilities:

Operating lease right-of-use assets

(26)

(50)

Total deferred tax liabilities

(26)

(50)

Net deferred tax asset (liability)

$

—

$

—

The valuation allowance increased by $17.8 million and $7.7 million in 2022 and 2021, respectively, due primarily to continuing operations.

The Company’s net operating loss carryforwards of $133.4 million are federal, of which $74.1 million expires between 2029 and 2037 and $43.9 million carries forward indefinitely. As of December 31, 2022, the Company had federal research and development tax credits of approximately $16.1 million, which expire in the years 2024 through 2042.

Unrecognized tax benefits

As of December 31, 2022, 2021 and 2020, the Company has unrecognized tax benefits related to tax credits of $6.5 million, $5.0 million and $4.5 million, respectively. None of the unrecognized tax benefits as of December 31, 2022, if recognized, would impact the effective tax rate due to the valuation allowance and no interest or penalties have been recognized. A reconciliation of the beginning and ending balance of unrecognized tax benefits is as follows (in thousands):

Year ended December 31,

2022

2021

2020

Beginning balance

$

5,001

$

4,500

$

4,400

Additions based on tax positions related to the current year

1,495

501

100

Ending balance

$

6,496

$

5,001

$

4,500

As of December 31, 2022, there were no unrecognized tax benefits that we expect would change significantly over the next 12 months.

The Company files U.S. and Texas income tax returns. In the United States, the statute of limitations with respect to the federal income tax returns for tax years after 2018 are open to audit; however, since the Company has net operating losses, the taxing authority has the ability to review tax returns prior to the 2019 tax year and make adjustments to these net operating loss carryforwards. We are not under audit in any taxing jurisdiction at this time.