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INCOME TAXES | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant components of deferred tax assets and liabilities are as follows (in thousands):
| As of December 31,
| 2022 |  | 2021
Deferred tax assets: |  |  |
Net operating losses | $ | 34,454 |  |  | $ | 24,655 |
Tax credit carryforward | 909 |  |  | 292 |
Equity compensation | 737 |  |  | 1,143 |
Capitalized research and development expenses | 16,946 |  |  | — |
Other | 2,153 |  |  | 1,231 |
Total deferred tax assets | 55,199 |  |  | 27,321 |
Valuation allowance | (54,261) |  |  | (27,321) |
Deferred tax assets, net of valuation allowance | 938 |  |  | — |
Deferred tax liabilities: |  |  |
Right-of-use assets | (938) |  |  | — |
Net deferred tax | $ | — |  |  | $ | — |
The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. Included in the Act is the requirement to capitalize and amortize research and development expenditures beginning in 2022. Prior to 2022, the Company had been expensing these costs as incurred for tax purposes. The capitalization of the research and development expenditures resulted in a new deferred tax asset of $16,946 thousand, which was offset by a valuation allowance, resulting in no significant impact to income tax expense for the year ending December 31, 2022. ASC 740 requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. Because of the Company’s history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely and, accordingly, has provided a valuation allowance for fiscal years 2022 and 2021. The valuation allowance increased by $26,940 thousand during the year ended December 31, 2022. As of December 31, 2022, the Company has federal and state net operating loss carryforwards of $130,708 thousand and $130,578 thousand, respectively. Federal net operating losses generated prior to 2018 will start to expire in 2032. Federal net operating losses generated after 2017 do not expire. The state net operating losses will begin to expire in 2027. The Company also has federal and state research and development tax credit carryforwards totaling $1,795 thousand and $28 thousand, respectively. The federal research and development credit carryforwards begin to expire in 2039, unless previously utilized. The state research and development credit carryforwards do not expire. The effective tax rate of the Company’s provision for income taxes differs from the federal statutory rate as follows:
| Years Ended December 31,
| 2022 |  | 2021
Federal statutory tax rate | 21.0 | % |  | 21.0 | %
State tax, net of federal tax benefit | 7.2 |  |  | 0.6 |
Stock compensation | (0.2) |  |  | 0.0 |
Non-deductible officer compensation | (1.4) |  |  | (0.1) |
Transaction costs related to the Business Combination | — |  |  | (0.2) |
Warrant liabilities revaluation | 6.6 |  |  | (1.7) |
Derivative liabilities revaluation | — |  |  | (9.8) |
Earnout Shares liabilities revaluation | 0.4 |  |  | (6.8) |
Permanent differences | 0.1 |  |  | 0.0 |
R&D tax credits | 0.8 |  |  | 0.0 |
Other | 0.1 |  |  | 0.1 |
Valuation allowance | (34.6) |  |  | (3.1) |
Effective tax rate | — | % |  | — | %
The changes in the Company's uncertain tax positions are summarized as follows (in thousands):
Balance as of December 31, 2020 | $ | 47 |
Additions in 2021 | 245 |
Balance as of December 31, 2021 | 292 |
Additions in 2022 | 613 |
Balance as of December 31, 2022 | $ | 905 |
During the years ended December 31, 2022 and 2021, the Company recognized uncertain tax positions of $613 thousand and $245 thousand, respectively, related to a reduction of the research and development credit deferred tax asset. Unrecognized tax benefits may change during the next twelve months for items that arise in the ordinary course of business. The Company does not expect a material change to its unrecognized tax benefits over the next twelve months that would have an adverse effect on its operating results. The Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. The Company had no accrued interest or penalties related to uncertain tax positions as of 2022 and 2021. The Company files federal and certain state income tax returns, which provide varying statutes of limitations on assessments. However, because of net operating loss carryforwards, substantially all tax years since inception remain open to federal and state tax examination.

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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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