million and various state net operating loss carryforwards of $220.6 million. Net operating loss carryforwards for U.S. federal income tax purposes that were generated prior to January 1, 2018 have a twenty-year carryforward life, and the earliest layers will begin to expire in 2025. Under the Tax Cuts and Jobs Act of 2017, federal net operating losses incurred in 2018 and later years may be carried forward indefinitely, but the deductibility of such net operating losses is limited to 80% of the current year’s taxable income. U.S. state net operating loss carryforwards will start to expire in 2029 for the earliest net operating loss layers to the extent there is not sufficient state taxable income to utilize those net operating loss carryforwards. At December 31, 2021, the Company had $5.4 million and $2.5 million of federal and state income tax credits, respectively, to reduce future tax liabilities. At December 31, 2020, the Company had $8.0 million and $1.7 million of federal and state income tax credits, respectively, to reduce future tax liabilities. The federal income tax credits consist primarily of orphan drug credits and research and development credits. The U.S. state income tax credits consist primarily of California and Illinois research and development credits. Both the U.S. federal orphan drug credits and research and development credits have a twenty-year carryforward life. The U.S. federal orphan drug credits and research and development credits will both begin to expire in 2025. A reconciliation of the beginning and ending amounts of valuation allowances for the years ended December 31, 2021 and 2020 is as follows (in thousands): Valuation allowance at December 31, 2019 $ (68,950) Increase for 2020 activity (23,543) Valuation allowance at December 31, 2020 (92,493) Increase for 2021 activity (45,388) Valuation allowance at December 31, 2021 $ (137,881) The Company is required to recognize the financial statement effects of a tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. The Company accounts for the uncertainty in income taxes by utilizing a comprehensive model for the recognition, measurement, presentation and disclosure in financial statements of any uncertain tax positions that have been taken, or are expected to be taken, on an income tax return. The changes in the Company's uncertain income tax positions for the years ended December 31, 2021 and 2020, excluding interest and penalties, consisted of the following (in thousands): December 31, 2021 2020 Beginning balance - uncertain tax positions $ 929 $ 945 Increases related to tax positions taken during the current year 17 48 Decreases related to tax positions taken during the prior year (319) (64) Ending balance - uncertain tax positions $ 627 $ 929 For the year ended December 31, 2021, the increase in current year uncertain tax positions was attributable primarily to U.S. federal orphan drug credits and research and development credits and the decrease related to tax positions taken during the prior year was a result of return to provision adjustments. In the Company’s balance sheet, uncertain tax positions of $0.6 million were offset against deferred tax assets. Tax years prior to 2018 generally are not subject to examination by the Internal Revenue Service or state or local taxing authorities. The Company policy is to include interest and penalties related to uncertain tax penalties, if any, within the provision for taxes in the statements of operations. During the years ended December 31, 2021 and 2020, the Company incurred no interest and penalties related to income taxes. 19. Subsequent events Private placement On January 3, 2022, the Company entered into a securities purchase agreement in connection with a private placement with an affiliate of Armistice Capital, LLC (“Armistice”) for aggregate gross proceeds of approximately $30.0 million. In accordance with the purchase agreement, the Company issued to Armistice an aggregate of (i) 10,238,908 shares of the Company’s common stock, par value $0.0001 per share at a purchase price of $2.93 per share, and (ii) warrants to purchase an aggregate of 5,119,454 shares of the Company's common stock at an exercise price of $3.223 per share. The warrants became exercisable immediately upon the closing of XERIS BIOPHARMA HOLDINGS, INC. Notes to Consolidated Financial Statements 122
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