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, 2022

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)	2022			2021			2020
U.S.	$	(41,660	)	$	(31,411	)	$	(12,304	)
Foreign		(690	)		(1,741	)		(2,426	)
Income (loss) before income taxes	$	(42,350	)	$	(33,152	)	$	(14,730	)

Reconciliation of Income Tax Attributable to Operations

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

(In thousands)	2022			2021			2020
Income tax recovery at statutory rates (at a rate of 21% for all years presented)	$	(8,894	)	$	(6,962	)	$	(3,094	)
Expenses not deducted for tax purposes		299			224			118
Effect of tax rate changes on deferred tax assets and liabilities		(18	)		17			34
Rate differential on foreign earnings		(26	)		(77	)		(103	)
Research and development tax credits		(1,154	)		(134	)		(23	)
Change in valuation allowance		10,464			7,544			3,662
Reassessment of previously recognized net operating losses		9			(620	)		—
Adjustment to prior year research and development tax credits		(731	)		—			—
Other		51			8			(594	)
Income tax expense/(recovery)	$	—		$	—		$	—

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):

	2022			2021
Deferred tax assets
Tax basis in excess of book value of assets	$	899		$	897
Non-capital loss carryforwards		43,380			39,356
Research and development deductions and credits		8,942			7,058
Stock options		1,042			702
§59(e) Capitalized R&D expenses		11,342			7,159
Other		334			316
Total deferred tax assets		65,939			55,488
Valuation allowance		(65,546	)		(55,082	)
Net deferred assets		393			406
Deferred tax liabilities
Other		(393	)		(406	)
Total deferred tax liabilities		(393	)		(406	)

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, 2022 is as follows (in thousands):

	Year ended
	December 31,
	2022		2021			2020
Balance at January 1	$	761	$	767		$	724
Gross increases (decreases) related to prior period tax positions		—		(6	)		43
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	$	761		$	767

Summary of Years Open to Examination Under Different Jurisdiction

We are subject to taxes in Canada, the U.K. and the United States 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		2018 to 2022
United Kingdom		2016 to 2022
US		2019 to 2022