INCOME TAXES

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse.

Since its inception, the Company has incurred net taxable losses, and accordingly, no current provision for income taxes has been recorded. This amount differs from the amount computed by applying the U.S. federal income tax rate of 21% to pretax loss due to the provision of a valuation allowance to the extent of the Company’s net deferred tax asset, as well as to state income taxes and nondeductible expenses.

The effective income tax rate of the provision for income taxes differs from the federal statutory rate as follows:

	Year Ended December 31,
	2022		2021
Federal statutory income tax rate	21.0	%	21.0	%
Federal and state tax credits	1.6		1.5
State income taxes, net of federal benefit	4.2		8.3
Change in valuation allowance	(24.5)		(28.5)
Other permanent items	(0.8)		—
Section 382 limit	—		—
Stock-based compensation	(1.5)		(2.3)
Effective income tax rate	—	%	—	%

The tax effects of temporary differences that give rise to significant portions of the deferred income tax assets and liabilities are presented below:

	Year Ended December 31,
	2022		2021
	(in thousands)
Deferred tax assets:
Net operating loss carryforwards	$	46,000	$	40,992
Tax credits	3,803		1,686
Accruals and reserves	4,986		3,055
Stock-based expense	4,161		3,123
Start-up costs and amortized costs	9,460		5,013
IRC § 174 capitalized costs	18,252		—
Operating lease right-of-use asset, net	22		—
Total deferred tax assets	86,684		53,869
Valuation allowance	(86,602)		(53,430)
Net deferred tax assets	82		439
Deferred tax liabilities:
Unrealized gains/losses	(82)		—
Operating lease right-of-use asset, net	—		(439)
Total deferred tax liabilities	(82)		(439)
Total deferred tax assets, net	$	—	$	—

At December 31, 2022, the Company had approximately $175.6 million and $3.5 million of federal net operating loss and research and experimentation tax carryforwards, respectively, which will begin to expire in 2029. At December 31, 2022 ,the Company had approximately $196.7 million of state net operating loss carryforwards which will begin to expire in 2030. In addition, the realization of net operating losses to offset potential future taxable income and related income taxes that would otherwise be due is subject to annual limitations under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), and similar state provisions, which may result in the expiration of additional net operating losses before future utilization as a result of ownership changes. As a result of these ownership change provisions during 2020, the Company estimated an aggregate limitation on the utilization of net operating loss carryforwards of $59.0 million. In addition to the limitation of net operating losses of $59.0 million, approximately $15.3 million of research and development tax credits were derecognized with the inability of the Company to ever realize a benefit from those credits in the future. The Company determines on an annual basis whether net operating loss carryforwards will be limited. An IRC 382 analysis has been completed through December 31, 2022 and determined that there were no additional ownership changes. The Company will continue to evaluate changes in ownership and the related limitations on a go forward basis.

As of December 31, 2022 and 2021, the Company’s net deferred tax assets before valuation allowance was $86.6 million and $53.4 million, respectively. In assessing the realizability of its deferred tax assets, the Company considers whether it is more likely than not that some portion or all of its 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 those temporary differences become deductible. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. As the Company does not have any historical taxable income or projections of future taxable income over the periods in which the deferred tax assets are deductible, and after consideration of its history of operating losses, the Company does not believe it is more likely than not that it will realize the benefits of its net deferred tax assets, and accordingly, has established a valuation allowance equal to 100% of its net deferred tax assets at December 31, 2022 and 2021. The change in valuation allowance was an increase of $33.2 million in 2022 and an increase of $24.4 million in 2021.

The Company concluded that there were no significant uncertain tax positions relevant to the jurisdictions where it is required to file income tax returns requiring recognition in the consolidated financial statements for the years ended 2022 and 2021. As of December 31, 2022 and 2021, the Company had no accrued interest related to uncertain tax positions.

The Company’s federal and state returns for 2018 through 2022 remain open to examination by tax authorities.