Achieve Life Sciences, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Income Tax (Tables)

Income Tax (Tables)

12 Months Ended

Dec. 31, 2021

Summary of U.S. and Foreign Components of Income (Loss) before Income Taxes

U.S. and foreign components of income (loss) before income taxes were as follows (in thousands):

(In thousands)	2021			2020			2019
U.S.	$	(31,411	)	$	(12,304	)	$	(10,028	)
Foreign		(1,741	)		(2,426	)		(6,367	)
Income (loss) before income taxes	$	(33,152	)	$	(14,730	)	$	(16,395	)

Reconciliation of Income Tax Attributable to Operations

Income tax expense/(recovery) consisted of the following (in thousands):

(In thousands)	2021			2020			2019
Income tax recovery at statutory rates (at a rate of 21% for all years presented)	$	(6,962	)	$	(3,094	)	$	(3,490	)
Expenses not deducted for tax purposes		224			118			116
Effect of tax rate changes on deferred tax assets and liabilities		17			34			(13	)
Rate differential on foreign earnings		(77	)		(103	)		(296	)
Investment tax credits		(134	)		(23	)		(84	)
Change in valuation allowance		7,544			3,662			(3,246	)
Reassessment of previously recognized net operating losses		(620	)		—			7,192
Reversal of previously accrued taxes due to IRS reassessment		—			—			(221	)
Other		8			(594	)		(179	)
Income tax expense/(recovery)	$	—		$	—		$	(221	)

Summary of Tax Effects of Temporary Differences and Carryforwards Rise to Deferred Tax Assets and Liabilities

[b] The tax effects of the temporary differences and carryforwards that give rise to deferred tax assets and liabilities are as follows (in thousands):

	2021			2020
Deferred tax assets
Tax basis in excess of book value of assets	$	897		$	892
Non-capital loss carryforwards		39,356			35,596
Research and development deductions and credits		7,058			7,010
§59(e) Capitalized R&D expenses		7,159			3,757
Other		1,018			813
Total deferred tax assets		55,488			48,068
Valuation allowance		(55,082	)		(47,539	)
Net deferred assets		406			529
Deferred tax liabilities
Other		(406	)		(529	)
Total deferred tax liabilities		(406	)		(529	)

Net deferred tax assets		—			—

Reconciliation of Unrecognized Tax Benefits of Uncertain Tax Positions

[c] A reconciliation of the unrecognized tax benefits of uncertain tax positions for the year ended December 31, 2021 is as follows (in thousands):

	Year ended
	December 31,
	2021			2020		2019
Balance at January 1	$	767		$	724	$	717
Gross increases (decreases) related to prior period tax positions		(6	)		43		7
Gross increases (decreases) related to current period tax positions		—			—		—
Decreases relating to settlements with tax authorities		—			—		—
Reductions due to lapses of statute of limitations		—			—		—
Balance at December 31	$	761		$	767	$	724

Summary of Years Open to Examination Under Different Jurisdiction

We are subject to taxes in Canada, the U.K. and the U.S. until the applicable statute of limitations expires. Tax audits by their very nature are often complex and can require several years to complete.

Tax		Years open to
Jurisdiction		examination
Canada		2017 to 2021
United Kingdom		2013 to 2021
US		2018 to 2021