Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

7. Income Taxes

The Company has not recorded a current or deferred tax expense or benefit for the years ended December 31, 2022 or 2021. The net losses for the years ended December 31, 2022 and 2021 were generated solely in the United States.

A reconciliation of the Company’s income tax expense (benefit) to the amount computed by applying the federal statutory income tax rate is summarized as follows (in thousands):

	Year Ended December 31,
	2022			2021
Expected tax benefit computed at federal statutory rate	$	(13,242	)	$	(6,861	)
State income taxes, net of federal tax benefit		(3,754	)		(2,169	)
Permanent differences		1,899			324
Research and development credits		(2,930	)		(745	)
Reserve for uncertain tax positions		715			253
Other		80			328
Change in valuation allowance		17,232			8,870
Income tax expense (benefit)	$	—		$	—

Significant components of the Company’s net deferred tax assets (liabilities) are summarized as follows (in thousands):

	December 31,
	2022			2021
Deferred tax assets:
Net operating loss carryforwards	$	16,261		$	11,134
Research and development credit carryforwards		3,377			1,179
Stock-based compensation		3,453			1,273
Lease liability		7,081
Capitalized research and development		8,310			54
Other		430			77
Total deferred tax assets		38,912			13,717
Valuation allowance		(30,976	)		(13,390	)
Net deferred tax assets		7,936			327
Deferred tax liabilities:
Property and equipment		(1,519	)		(106	)
ROU asset		(6,235	)
Other		(182	)		(221	)
Total gross deferred tax liabilities		(7,936	)		(327	)
Net deferred tax assets	$	—		$	—

Deferred income tax assets and liabilities are recorded for differences between the financial statement and tax basis of the assets and liabilities that will result in taxable or deductible amounts in the future based on enacted laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

The Company has evaluated the available evidence supporting the realization of its gross deferred tax assets, including the amount and timing of future taxable income, and has determined it is more likely than not that the assets will not be realized. Due to uncertainties surrounding the realizability of the deferred tax assets, the Company maintains a full valuation allowance against its deferred tax assets at December 31, 2022 and 2021.

At December 31, 2022, the Company had federal and state net operating loss ("NOL") carryforwards of $50.0 million and $82.0 million, respectively. Federal NOL carryforwards totaling $0.5 million begin to expire in 2037, unless previously utilized, and federal NOL carryforwards of $49.5 million generated after 2017, may be carried forward indefinitely but can only be utilized to offset 80% of future taxable income. State NOL carryforwards totaling $82.0 million begin to expire in 2037, unless previously utilized. In

addition, the Company also has federal and state research and development ("R&D") credit carryforwards totaling $3.1 million and $1.9 million respectively. The federal R&D credit carryforwards will begin to expire in 2037 unless previously utilized. The state R&D credit carryforwards do not expire.

Utilization of the Company's NOL and R&D credit carryforwards may be subject to substantial annual limitations in the event a cumulative ownership change has occurred, or that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"). In general, an "ownership change," as defined by Section 382 of the Code, results from a transaction, or series of transactions over a three-year period, resulting in an ownership change of more than 50% of the outstanding stock of a company by certain stockholders or public groups. Such an ownership change may limit the amount of NOL and R&D credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. The Company has not completed such an ownership change analysis pursuant to Section 382 of the Code. If ownership changes have occurred or occur in the future, the amount of remaining tax attribute carryforwards available to offset taxable income and income tax expense in future years may be restricted or eliminated. If eliminated, the related asset would be removed from deferred tax assets with a corresponding reduction in the valuation allowance. Due to the existence of the valuation allowance, limitations created by future ownership changes, if any, will not impact the Company's effective tax rate.

The Company recognizes a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained upon examination by tax authorities. Further, due to the existence of the valuation allowance, future changes in the Company's unrecognized tax benefits will not impact the effective tax rate.

The following table summarizes the changes to the Company’s gross unrecognized tax benefits for the years ended December 31, 2022 and 2021 (in thousands):

	Year Ended December 31,
	2022		2021
Balance at beginning of year	$	510	$	234
Decreases related to prior year tax positions		—		(50	)
Increases related to current year tax positions		763		326
Balance at end of year	$	1,273	$	510

The Company had no accrual for interest or penalties on the Company's balance sheets at December 31, 2022 or 2021, and has not recognized interest and/or penalties in the statement of operations and comprehensive loss for the years ended December 31, 2022 and 2021. As of December 31, 2022 and 2021, the Company had unrecognized tax benefits of $1.3 million and $0.5 million, respectively, which if recognized currently, should not impact the effective tax rate due to the Company maintaining a full valuation allowance. The Company does not expect that there will be a significant change in the unrecognized tax benefit over the next twelve months.

The Company is subject to taxation in the United States and various state jurisdictions. All of the Company's tax years are subject to examination by federal and state tax authorities due to the carryforward of unutilized net operating losses and research and development credits. Further, the Company is not currently under examination by any federal, state or local tax authority.