Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

12. Income Taxes

The company has not recognized any current or deferred tax expense for the years ended December 31, 2021 and 2020.

The Company has incurred net operating losses for all periods since inception. The Company has not reflected any benefit of such net operating loss carryforwards in the accompanying financial statements. The Company has established a full valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets.

The following table presents a reconciliation of the statutory federal rate and the Company’s effective tax rate:

	Year Ended December 31,
	2021			2020
Statutory rate		21.0	%		21.0	%
State tax		(3.9	)%		8.8	%
Tax credits		1.2	%		2.5	%
Change in valuation allowance		(17.0	)%		(32.5	)%
Other		(0.4	)%		0.2	%
Stock compensation		(0.9	)%		—
Effective income tax rate		—	%		—	%

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 following table presents the significant components of the deferred tax assets and liabilities for the periods presented:

	December 31,
	2021			2020
	(In thousands)
Deferred tax assets:
Net operating loss carryforwards	$	13,482		$	4,276
Intangible assets		5,711			8,155
Tax credit carryforwards		2,276			1,407
Stock compensation		505			—
Accrual and other		455			648
Total deferred tax assets		22,429			14,486
Deferred tax liabilities:
Property and equipment		(90	)		(160	)
Total deferred tax liabilities		(90	)		(160	)
Valuation allowance		(22,339	)		(14,326	)
Net deferred taxes	$	—		$	—

The tax benefits of net operating losses, temporary differences and credit carryforwards are 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 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 to be realized and, accordingly, has provided a valuation allowance. The valuation allowance increased by $8.0 million and $7.5 million during the years ended December 31, 2021 and 2020, respectively.

The Company had pre-tax net operating losses and tax credit carryforwards as of December 31, 2021 as follows (in thousands):

	Amount		Expiration Years
Net operating losses, federal	$	59,000	Do not expire
Net operating losses, state		15,631	2038-2041
Tax credits, federal		1,929	2038-2041
Tax credits, state		1,398	N/A

The ability of the Company to utilize net operating losses and credit carryforwards to reduce future domestic taxable income and domestic income tax is subject to various limitations under the Internal Revenue Code (Code). Internal Revenue Code Section 382 places a limitation (Section 382 Limitation) on the amount of taxable income that can be offset by NOL carryforwards after a change in control (generally greater than 50% change in ownership within a three-year period) of a loss corporation. California has similar rules. Generally, after a change in control, a loss corporation cannot deduct NOL carryforwards in excess of the Section 382 Limitation. Due to these “change in ownership” provisions, utilization of the NOL and tax credit carryforwards may be subject to an annual limitation regarding their utilization against taxable income in future periods.

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2021 and 2020 is as follows:

	December 31,
	2021		2020
	(In thousands)
Balance, beginning of year	$	515	$	180
Additions based on tax positions related to current year		317		229
Additions for tax positions of prior years		—		106
Balance, end of year	$	832	$	515

The entire amount of the unrecognized tax benefits would not impact the Company’s effective tax rate if recognized. The Company has elected to include interest and penalties as a component of tax expense. Through December 31, 2021, the Company did not recognize accrued interest and penalties related to unrecognized tax benefits. The Company does not anticipate that the amount of existing unrecognized tax benefits will significantly increase or decrease during the next 12 months. The Company files income tax returns in the U.S. and California and is subject to examination by U.S. federal and state tax authorities for all years since inception due to the carry forward of unutilized net operating losses and research development credits.