Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

(9)Income Taxes

For the years ended December 31, 2021 and December 31, 2020, the Company did not record a current or deferred income tax expense or benefit due to current and historical losses incurred by the Company.

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

	Year ended December 31,
	2021			2020
Federal statutory rate		21.00	%		21.00	%
State taxes, net of federal benefit		9.96	%		(1.83	)%
Permanent differences		0.01	%		(0.01	)%
Equity-based compensation		0.39	%		—
Tax credits		(0.25	)%		0.77	%
Valuation allowance		(32.12	%)		(12.65	%)
Non-taxable income		—			(5.01	)%
IPR&D		—			(2.28	%)
Change in tax status		1.76	%		—
Return to provision		1.15	%		—
Other		(1.90	)%		—
		0.00	%		0.00	%

The net deferred income tax asset balance related to the following:

	December 31,
	2021			2020
	(in thousands)
Deferred tax assets:
Net operating loss	$	31,414		$	18,563
Capitalized organizational and start-up expenses		140			148
Licenses		1,875			1,601
Accrued expenses		968			467
Research and development credit		1,563			1,859
Equity-based compensation		8,584			8
Gross deferred tax assets		44,544			22,646
Valuation allowance		(44,552	)		(22,642	)
Net deferred tax asset		(8	)		4
Deferred tax liability
Depreciation and amortization		8			(4	)
Net deferred tax asset	$	—		$	—

As of December 31, 2021, the Company had federal and state net operating loss (NOL) carryforwards of $117.4 million and $119.0 million, respectively. The Company generated federal NOLs of $5.8 million prior to 2018, which begin to expire in 2036. State losses also begin to expire in 2036. The Company generated combined federal NOLs of $111.6 million, which can be carried forward indefinitely. As of December 31, 2021, the Company had federal and state research and development tax credit carryforwards of $1.3 million and $0.1 million, respectively, which begin to expire in 2037 and 2033, respectively. The Company has state research and development tax credit carryforwards of $0.3 million which can be carried forward indefinitely.

Utilization of the net operating loss carryforwards and research and development tax credits may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 (Section 382) due to ownership change limitations that have occurred previously or that could occur in the future in accordance with Section 382, as well as similar state provisions. These ownership changes may limit the amount of NOL carryforwards that can be utilized annually to offset future taxable income. In general, an ownership change as defined by Section 382 results from transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50 percentage points over a three-year period.

The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets, which are comprised principally of net operating loss carryforwards, licenses, equity-based compensation and research and development credit carryforwards. Management has considered the Company’s history of net losses since inception and its lack of commercialization of any products and has concluded that it is more likely than not the Company will not realize the benefits of the deferred tax assets. The Company’s valuation allowance increased during the years ended December 31, 2021 and 2020 due primarily to the generation of net operating losses, as follows:

	Year ended December 31,
	2021		2020
	(in thousands)
Valuation allowance at beginning of year	$	22,642	$	10,653
Increases recorded to income tax provision		21,674		11,989
Increases recorded to OCI/Equity		236		—
Valuation allowance at end of year	$	44,552	$	22,642

The calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations for both federal taxes and the states in which the Company operates or does business in. ASC 740 states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits.

The Company records uncertain tax positions as liabilities in accordance with ASC 740 and adjusts these liabilities when its judgment changes as a result of the evaluation of new information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company’s current estimate of the unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available. As of December 31, 2021 and 2020, the Company has not recorded any uncertain tax positions in its consolidated financial statements.

The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statements of operations and comprehensive loss. As of December 31, 2021 and 2020, no accrued interest or penalties are included in the consolidated balance sheet.

The Company files 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 in the United States. There are currently no pending tax examinations. The Company thus is still open under the U.S. statute from 2016 to the present. To the extent that the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service and the state tax authorities to the extent utilized in a future period. The Company had not, as yet, conducted a study of research and development tax credit carryforwards. This study may result in an adjustment to the Company’s research and development credit carryforwards; however, until a study is completed, and any adjustment is known, no amounts are being presented as an uncertain tax position. 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 valuation allowance. Thus, there would be no impact to the balance sheets or statements of operations and comprehensive loss if an adjustment was required.