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Income Taxes | 9 Months Ended
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Sep. 30, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Note 10 — Income Taxes The Company files income tax returns in the U.S. federal and Connecticut jurisdictions and are subject to examination. The income tax provision consists of the following:
| For the Period from January 28, 2021 (inception) through December 31, 2021
Current |
Federal | $ | — |
State | — |
Deferred |
Federal | (290,181) |
State |
Valuation allowance | 290,181 |
Income tax provision | $ | — |
The Company’s net deferred tax assets are as follows:
| December 31, 2021
Deferred tax assets: |
Start-up/Organization costs | $ | 210,307 |
Net operating loss carryforwards | 79,874 |
Total deferred tax assets | 290,181 |
Valuation allowance | (290,181) |
Deferred tax asset, net of allowance | $ | — |
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax assets, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance. For the period from January 28, 2021 (inception) through December 31, 2021, the valuation allowance was $290,181. As of December 31, 2021, the Company had $380,351 of U.S. federal net operating loss carryovers, which do not expire, available to offset future taxable income. There were no unrecognized tax benefits as of December 31, 2021. No amounts were accrued for the payment of interest and penalties as of December 31, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. A reconciliation of the statutory federal income tax rate (benefit) to the Company’s effective tax rate (benefit) is as follows:
| For the Period from January 28, 2021 (inception) through December 31, 2021
Statutory federal income tax rate | 21.0 | %
Change in fair value of derivative warrant liabilities | (855.9) | %
Offering costs allocated to derivative warrant liabilities | 214.0 | %
Change in valuation allowance | 620.9 | %
Income tax expense | 0.0 | %
Income Taxes The Company is subject to federal state income taxes in the United States, as well as income taxes in foreign jurisdictions in which it conducts business. The Company does not provide for federal income taxes on the undistributed earnings of its foreign subsidiaries as such earnings are reinvested indefinitely. The Company and its foreign subsidiaries have historically been loss generating entities that have resulted in no excess earnings to consider for repatriation and accordingly there are no deferred income taxes recognized for the nine months ended September 30, 2022 and 2021. The Company recorded an income tax expense of $0 for the nine months ended September 30, 2022 and 2021, representing an effective tax rate of 0%. The difference between the U.S. federal statutory rate of 21% and the Company's effective tax rate in the first nine months ended September 30, 2022 is primarily due to a full valuation allowance related to the Company's U.S. deferred tax assets and tax benefits in the Company's foreign jurisdictions. For the first nine months ended September 30, 2021, the Company's effective tax rate was computed based on income tax rate in New Zealand of 28.0% as the Company was still domiciled in New Zealand. The Company reassesses the need for a valuation allowance on a quarterly basis. If it is determined that a portion or all of the valuation allowance is not required, it will generally be a benefit to the income tax provision in the period such determination is made. The Company conducts business in multiple jurisdictions within and outside the United States. Consequently, the Company is subject to periodic income tax examinations by domestic and foreign income tax authorities. The Company is subject to audits for tax years 2009 and onward for federal purposes. There are tax years which remain subject to examination in various other state and foreign jurisdictions that are not material to the Company's financial statements. During 2021, the Company migrated its country of domicile from New Zealand to Delaware in the United States. On migration, the Company was deemed to have disposed of all its assets and liabilities to a third-party at market value which resulted in taxable income to the Company for New Zealand income tax purposes which was fully offset by net operating loss carryforwards and deferred R&D credits in New Zealand. The migration to Delaware is classified as a tax-free reorganization for U.S. federal income tax purposes. Income Taxes The components of (loss) income before income taxes and gain from equity method investees, net are as follows (in thousands):
| Year Ended December 31,
| 2021 |  | 2020
| as Restated |  | as Restated
United States | $ | (39,860) |  |  | $ | 106 |
New Zealand | $ | (7,551) |  |  | $ | (40,651) |
Foreign | $ | 722 |  |  | $ | 2,832 |
Total | $ | (46,689) |  |  | $ | (37,713) |
The components of income tax expense were as follows (in thousands):
| Year Ended December 31,
| 2021 |  | 2020
Current: |  |  |
United States | $ | — |  |  | $ | — |
New Zealand | $ | — |  |  | $ | — |
Foreign | $ | — |  |  | $ | — |
Total | $ | — |  |  | $ | — |
Deferred: |  |  |
United States | — |  |  | — |
New Zealand | — |  |  | — |
Foreign | — |  |  | — |
Total | — |  |  | — |
The following table is a reconciliation of income taxes computed at the statutory federal income tax rate (21.0% federal income tax rate in the United States for 2021 and 28.0% federal income tax rate in the New Zealand for 2020, respectively) to the income tax expense (benefit) reflected in the consolidated statement of operations and comprehensive loss (in thousands, except percentages):
| Year Ended December 31,
| 2021 |  | 2020
| as Restated |  | as Restated
Income tax (benefit) at the statutory federal income tax rate | $ | (9,805) |  |  | 21.0 | % |  | $ | (10,560) |  |  | 28.0 | %
Foreign tax rate differential | (605) |  |  | 1.3 | % |  | 1,180 |  |  | (3.2) | %
State and local taxes | (4,068) |  |  | 8.7 | % |  | (2,429) |  |  | 6.4 | %
Effects of impairment | — |  |  | — | % |  | 10,281 |  |  | (27.9) | %
Foreign exchange differences | (143) |  |  | 0.3 | % |  | (5,892) |  |  | 16.0 | %
Stock-based compensation | 501 |  |  | (1.1) | % |  | 670 |  |  | (1.8) | %
Interest income on receivable | 882 |  |  | (1.9) | % |  | 2,120 |  |  | (5.7) | %
Equity method investment | (443) |  |  | 0.9 | % |  | (679) |  |  | 1.8 | %
Non-deductible legal costs | 1,291 |  |  | (2.8) | % |  | — |  |  | — | %
Gain from redomiciliation of intellectual property | 4,890 |  |  | (10.5) | % |  | — |  |  | — | %
Valuation allowance | 7,958 |  |  | (17.0) | % |  | 5,505 |  |  | (14.1) | %
PPP loan forgiveness | (644) |  |  | 1.4 | % |  | $ | — |  |  | — | %
Other | 186 |  |  | (0.3) | % |  | (196) |  |  | 0.5 | %
Total income tax benefit | $ | — |  |  | — | % |  | $ | — |  |  | — | %
Deferred Taxes Significant components of deferred tax assets and liabilities as of December 31, 2021 and 2020, were as follows (in thousands):
|  | Year Ended December 31,
|  | 2021 |  | 2020
Deferred tax assets: |  | as Restated |  | as Restated
Net operating loss and credit carryforwards |  | $ | 107,979 |  |  | $ | 104,301 |
Operating lease liability |  | 1,878 |  |  | 2,394 |
Accrued bonus |  | 981 |  |  | 850 |
Accrued expenses |  | 1,566 |  |  | 429 |
Deferred revenue |  | 309 |  |  | 1,018 |
Equity method investment |  | 1,243 |  |  | 1,031 |
Other |  | 925 |  |  | 394 |
|  | $ | 114,881 |  |  | $ | 110,417 |
Valuation allowance |  | (113,276) |  |  | (108,300) |
Net deferred tax asset |  | $ | 1,605 |  |  | $ | 2,117 |
Deferred tax liabilities: |  |  |  |
Operating lease asset |  | (1,429) |  |  | (1,941) |
Other |  | (176) |  |  | (176) |
Total deferred tax liabilities |  | $ | (1,605) |  |  | $ | (2,117) |
Net deferred income tax assets and liabilities: |  | $ | — |  |  | $ | — |
At December 31, 2021 and 2020, the Company had $299,194 and $271,390, respectively, of tax losses and credits carried forward subject to shareholder continuity and acceptance in the countries where the Company has tax losses carried forward. R&D tax credits included within these amounts are $35,147 and $40,556, respectively, which may be available to offset future income tax liabilities. At December 31, 2021 and 2020, the net operating loss and credit carryforwards are comprised of $239,559 and $196,442 in the United States, $22,203 and $18,104 in state and local, $35,116 and $54,334 in New Zealand, and $4,589 and $2,510 in other foreign jurisdictions, respectively. At December 31, 2021 and 2020, the Company had net operating loss carryforwards of approximately $136,454 and $132,373, respectively, that expire in various years from 2022 through 2037, plus $127,593 and $98,462, respectively, for which there is no expiration date. Section 382 of the Internal Revenue Code imposes an annual limitation on the utilization of net operating loss carryforwards based on a statutory rate of return and the value of the corporation at the time of a “change of ownership” as defined by Section 382. The Company had a change in ownership in November 2014. T herefore, the Company’s ability to utilize its net operating loss carryforwards incurred prior to the 2014 ownership change, will be subject in future periods to annual limitations. In assessing the realizability of deferred tax assets, the Company assesses whether it is more-likely-than-not that a portion or all of the deferred tax assets will not be realized. The Company considers the scheduled reversal of deferred tax liabilities, tax planning strategies and projected future taxable income in making this assessment. At December 31, 2021 and 2020, a valuation allowance of $113,276 and $108,300, respectively, was recorded against certain deferred tax assets based on this assessment. The Company believes it is more-likely-than-not that the tax benefit of the remaining net deferred tax assets will be realized. The amount of net deferred tax assets considered realizable could be increased or reduced in the future if the Company’s assessment of future taxable income or tax planning strategies changes. The Company and its foreign subsidiaries have historically been loss generating entities that have resulted in no excess earnings to consider for repatriation and accordingly there are no deferred income taxes recognized as of December 31, 2021 and 2020. At December 31, 2021 and 2020, the Company had no tax liability or benefit related to uncertain tax positions. No interest or penalties related to uncertain taxes have been recognized on the accompanying consolidated statements of operations. Management does not expect a significant change in uncertain tax positions during the twelve months subsequent to December 31, 2021. The Company conducts business in multiple jurisdictions within and outside the United States. Consequently, the Company is subject to periodic income tax examinations by domestic and foreign income tax authorities. During December 2021, the Internal Revenue Service completed an income tax examination of the Company’s U.S. federal income tax return for the year ended December 31, 2016, which resulted in no impact to the Company’s consolidated financial statements. The Company has no other ongoing tax examinations with domestic or foreign taxing authorities. During 2021, the Company migrated its country of domicile from New Zealand to Delaware in the United States. On migration, the Company was deemed to have disposed of all its assets and liabilities to a third-party at market value which resulted in taxable income to the Company for New Zealand income tax purposes. The migration to Delaware is classified as a tax-free reorganization for U.S. federal income 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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