Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

11. Income Taxes

Tax Provision Components

During the years ended December 31, 2021 and 2020, the Company recorded no income tax benefits for the net operating losses incurred or for the research and development tax credits generated in each year in the United States, due to the uncertainty regarding the realizability of these respective deferred tax assets. The Company generated income in the Netherlands for the years ended December 31, 2021 and 2020 and, accordingly, recorded a foreign income tax provision of less than $ 0.1 million for each of the years ended December 31, 2021 and 2020, respectively.

Income Before Taxes

The domestic and foreign components of loss before income taxes were as follows (in thousands):

	Year Ended December 31,
	2021			2020
United States	$	(44,321	)	$	(28,803	)
Foreign		142			87
	$	(44,179	)	$	(28,716	)

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

	Year Ended December 31,
	2021			2020
Federal statutory income tax rate		(21.0	)%		(21.0	)%
State taxes, net of federal benefit		(6.9	)%		(5.7	)%
Federal and state research and development tax    credits		(2.4	)%		(3.6	)%
Nondeductible items		(3.2	)%		(0.2	)%
Deferred tax effect of change in state blended rate		(1.7	)%		7.8	%
Return to provision		1.1	%		1.7	%
Other		(0.2	)%		0.0	%
Change in deferred tax asset valuation allowance		34.3	%		20.9	%
Effective income tax rate		0.0	%		(0.1	)%

Net deferred tax assets consisted of the following (in thousands):

	December 31,
	2021			2020
Deferred tax assets:
Net operating loss carryforwards	$	94,672		$	81,390
Capitalized research and development expense		4,291			6,136
Research and development tax credit carryforwards		12,186			11,541
Accrued expenses		2,528			1,390
Stock-based compensation expense		2,254			791
Deferred rent		—			79
Lease liability		2,299			—
Other		170			132
Total deferred tax assets		118,400			101,459
Deferred tax liabilities:
Other		(674	)		(218	)
Right-of-use assets		(1,562	)		—
Unrealized gain (loss)		—			(212	)
Total deferred tax liabilities		(2,236	)		(430	)
Valuation allowance		(116,164	)		(101,029	)
Net deferred tax assets	$	—		$	—

As of December 31, 2021, the Company had U.S. federal and state net operating loss carryforwards of $368.1 million and $304.0 million, respectively, which may be available to offset future taxable income and begin to expire in 2022 and 2030, respectively. The Company’s federal net operating loss carryforwards include $156.4 million that can be carried forward indefinitely. As of December 31, 2021, the Company also had U.S. federal and state research and development tax credit carryforwards of $8.0 million and $5.3 million, respectively, which may be available to offset future tax liabilities and begin to expire in 2022 and 2024, respectively. As of December 31, 2021, the Company had no foreign net operating loss carryforwards.

Utilization of the U.S. federal and state net operating loss carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Sections 382 and 383 of the Internal Revenue Code of 1986, and corresponding provisions of state law, due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income or tax liabilities. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50% over a three-year period. The Company has not conducted a study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception due to the significant complexity and cost associated with such a study. If the Company has experienced a change of control, as defined by Section 382, at any time since inception, utilization of the net operating loss carryforwards or research and development tax credit carryforwards would be subject to an annual limitation under Section 382, which is determined by first multiplying the value of the Company’s stock at the time of the

ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required. Any limitation may result in expiration of a portion of the net operating loss carryforwards or research and development tax credit carryforwards before utilization. Further, until a study is completed by the Company and any limitation is known, no amounts are being presented as an uncertain tax position.

As required by Accounting Standard Codification 740, management of the Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, which are comprised principally of net operating loss carryforwards. Management has determined that it is more likely than not that the Company will not recognize the benefits of federal and state deferred tax assets and, as a result, a valuation allowance of approximately $116.2 million has been recorded. During 2021, the Company recorded a net increase to its valuation allowance in the amount of $15.1 million primarily attributable to the current year operating loss and research credit generation for which the Company cannot provide a tax benefit.

The Company had no unrecognized tax benefits or related interest and penalties accrued for the years ended December 31, 2021 and 2020. The Company's policy is to record any interest or penalties related to income taxes as part of the income tax provision.

The Company generated research credits for the tax years ending after December 31, 2001 but has not conducted a study to document qualified activities. This study may result in an adjustment to the Company's research and development carryforwards; however, until a study is completed and any adjustment is known, no amounts are being presented as an unrecognized tax benefit for the year ended December 31, 2021. A full valuation allowance has been provided against the Company's research and development credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the deferred tax asset established for the research credit carryforward and the valuation allowance.

The Company files income tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. There are currently no pending federal or state tax examinations. The Company has open tax years subject to examination from fiscal year 2018 to present. To the extent that the Company has carryforward attributes, the tax years in which the attribute was generated may still be adjusted upon examination by federal, state or local tax authorities if they either have been or will be used in the future.

Changes in the valuation allowance for deferred tax assets during the years ended December 31, 2021 and 2020 related primarily to the increase in net operating loss carryforwards and research and development tax credit carryforwards in 2021 and 2020, and were as follows (in thousands):

	Year Ended December 31,
	2021			2020
Valuation allowance as of beginning of year	$	(101,029	)	$	(95,024	)
Decreases recorded as benefit to income tax provision		—			—
Increases recorded to income tax provision		(15,135	)		(6,005	)
Valuation allowance as of end of year	$	(116,164	)	$	(101,029	)

As of December 31, 2021 and 2020, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts had been recognized in the Company’s consolidated statements of operations.