Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

14. Income Taxes

The Company accounts for income taxes under FASB ASC 740 (“ASC 740”). For the years ended December 31, 2021 and 2020, the Company did not record a current or deferred income tax expense or benefit. The following table reconciles the federal statutory income rate to the Company’s effective income tax rate:

	Year Ended December 31,
	2021	2020
Federal income tax rate	21.0 %	21.0 %
State income tax benefit	6.0 %	6.0 %
Permanent items	(0.3) %	—
Research tax credits	4.1 %	5.8 %
Other	(0.3) %	(0.2) %
Valuation allowance	(30.5) %	(32.6) %
Effective income tax rate	—	—

Deferred tax assets and liabilities reflect the net tax effects of net operating loss and tax credit carryforwards and temporary differences between the carrying amount of assets and liabilities for financial reporting and the

amounts used for tax purposes. Significant components of the Company’s deferred tax assets and liabilities were as follows:

	December 31,
(in thousands)	2021			2020
Deferred tax assets:
Accrued expenses	$	972		$	659
Federal net operating loss carryforwards		25,060			11,515
State net operating loss carryforwards		6,913			3,113
Tax credits		5,675			2,851
Stock compensation		529			177
Amortization		191			—
Lease liability		4,675			4,941
Total deferred tax assets		44,015			23,256
Valuation allowance		(39,401	)		(18,414	)
Net total deferred tax assets	$	4,614		$	4,842
Deferred tax liabilities:
Lease right of use asset		(4,234	)		(4,624	)
Depreciation and amortization		(380	)		(218	)
Total deferred tax liabilities	$	(4,614	)	$	(4,842	)
Net deferred tax assets	$	—		$	—

The Company has weighed the positive and negative evidence to assess the recoverability of its deferred tax assets. Realization of future tax benefits is dependent on many factors, including the Company’s ability to generate taxable income. After this assessment, the Company determined it was more likely than not that the Company will not realize the benefit of its deferred tax assets. As a result, the Company has provided a full valuation allowance against its net deferred tax assets. The valuation allowance for deferred tax assets as of December 31, 2021 and 2020 was $39.4 million and $18.4 million, respectively. For the years ended December 31, 2021 and 2020, the Company recorded an increase in the valuation allowance of $21.0 million and $14.1 million, respectively, primarily related to net operating losses and tax credits.

As of December 31, 2021, the Company had gross U.S. federal net operating loss carryforwards of $119.3 million including $117.4 million that had an indefinite carryforward period and $1.9 million that were subject to expiration at various dates through 2037. As of December 31, 2021, the Company had state net operating loss carryforwards of $109.2 million which will expire at various dates through 2041. As of December 31, 2021, the Company had U.S. federal research and development tax credit carryforwards of $3.5 million which will expire at various dates through 2041 and state research and credit carryforwards of $2.8 million which will expire at various dates through 2036. The net operating loss and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities.

Net operating loss and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the 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. The Company has not determined whether an ownership change has occurred and as such, the Company’s net operating losses may be limited. Any limitation may result in expiration of a portion of the net operating loss carryforwards or research development credit carryforwards before utilization.

The Company has not, as yet, conducted a study of research and development credit carryforwards. Such a study, once undertaken by the Company, may result in an adjustment to the research and development credit carryforwards. However, a full valuation allowance has been provided against the Company’s research and development credits and, if any adjustment is required, such adjustment would be offset by an adjustment to the valuation allowance. Thus, there would be no impact to the balance sheet or statement of operations if any adjustment is required.

As of December 31, 2021 and 2020, the Company did not have any unrecognized tax benefits. Any future interest and penalties related to income tax matters would be recognized in the provision for income tax. As of December 31, 2021 and 2020, the Company did not have a balance of accrued interest and penalties related to uncertain tax positions.

In March 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law. The CARES Act includes provisions relating to several aspects of corporate income taxes. The CARES Act did not have a significant impact on the Company’s provision for income taxes.

The Company files income tax returns in the United States and various states. As of December 31, 2021 , there were no income tax examinations in progress.

The tax years 2018 through present remain open to examination by major taxing jurisdictions to which the Company is subject, which are primarily in the United States. In addition, tax years prior to 2018 resulted in losses and the Company also generated research and development tax credits during those years. Since carryforward attributes generated in these years may be utilized in future years, years prior to 2018 may still be adjusted upon examination by the Internal Revenue Service or state tax authorities if they have or will be used in a future period.