Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

11. Income Taxes

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and liabilities were as follows:

	December 31,
(in thousands)	2021			2020
Deferred tax assets:
Net operating loss carryforwards	$	60,495		$	28,283
Research and development credits		11,240			4,753
Stock-based compensation		2,448			33
Accrued expense		1,290			—
Lease liabilities		485			—
Gross deferred tax assets		75,958			33,069
Less: valuation allowance		(75,371	)		(32,899	)
Total deferred tax asset		587			170
Deferred tax liability
Right-of-use assets		(476	)		—
Depreciation		(111	)		(170	)
Total deferred tax liabilities		(587	)		(170	)
Net deferred tax assets	$	—		$	—

In assessing the need for a valuation allowance, management must determine that there will be sufficient taxable income to allow for the realization of deferred tax assets. Based upon the historical and anticipated future losses, management has determined that the deferred tax assets do not meet the more likely than not threshold for realizability. Accordingly, a full valuation allowance has been recorded against the Company’s net deferred tax assets as of December 31, 2021 and December

31, 2020. The valuation allowance increased by $42.5 million and $17.5 million during the years ended December 31, 2021 and 2020, respectively.

A reconciliation of the federal income tax rate to the Company’s effective tax rate is as follows:

	Year ended December 31,
	2021			2020
Federal tax benefit at statutory rate		(21.0	)%		(21.0	)%
State tax, net of federal benefit		(7.7	)		(6.5	)
Permanent differences		(3.5	)		1.2
Research and development		(5.8	)		(4.4	)
Change in valuation allowance		38.0			30.7
		—	%		—	%

The following table summarizes carryforwards of federal and state net operating losses (“NOL”) and research tax credits:

	December 31,
(in thousands)	2021		2020
NOL carryforwards - Federal	$	217,038	$	101,471
NOL carryforwards - State		217,038		101,471
Research tax credits - Federal		11,206		4,720
Research tax credits - State		43		43

The NOL carryforwards begin expiring in 2036 for federal and Delaware state income tax purposes, however; all federal and Delaware state NOL carryforwards generated subsequent to January 1, 2018, are able to be carried forward indefinitely. As of December 31, 2021, the Company also had federal and Delaware research and development tax credit carryforwards of $11.2 million and $43 thousand, respectively, that will begin to expire in 2036 and 2031, respectively, unless previously utilized.

The NOL and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. NOL and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code, respectively, as well as similar state provisions. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. To date, the Company has not performed an analysis to determine whether or not ownership changes have occurred since inception. Delaware state NOLs may also be limited.

As of December 31, 2021, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s statement of operations. Due to NOL and tax credit carry forwards that remain unutilized, income tax returns for all tax years remain subject to examination by the taxing jurisdictions. The NOL carryforwards remain subject to review until utilized.