Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

10. Income Taxes

There is no provision for income taxes because the Company has historically incurred net operating losses and maintains a full valuation allowance against its deferred tax assets.

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 income tax expense at statutory rate		21	%		21	%
State taxes—net of federal benefit		5			5
Change in fair value of preferred stock tranche obligations		—			—
Permanent differences and other		(1	)		—
Federal & state R&D credits		2			1
Increase in valuation allowance		(27	)		(27	)
Effective income tax rate		0	%		0	%

Significant components of the Company’s net deferred tax assets at December 31, 2021 and 2020 are as follows:

	Year Ended December 31,
(in thousands)	2021			2020
Deferred tax assets:
Stock-based compensation	$	2,333		$	1,349
Net operating loss carryforwards		51,500			18,858
Credit carryforwards		4,799			1,155
Fixed assets		705			—
Accrued expenses		5,205			580
Lease liability		8,916			—
Total deferred tax assets		73,458			21,942
Valuation allowance		(63,546	)		(21,899	)
Total net deferred tax assets		9,912			43
Deferred tax liabilities:
Fixed assets		—			(43	)
Right of use asset		(9,912	)		—
Total deferred tax liability		(9,912	)		(43	)
Total deferred tax assets (liabilities)	$	—		$	—

As of December 31, 2021, the Company had federal and state net operating loss carryforwards of $188.7 million and $188.0 million, respectively. The federal net operating loss carryforwards are indefinite lived and the state net operating loss carryforwards begin to expire in 2038. As of December 31, 2021, the Company also had federal and state research and development tax credit carryforwards $3.6 million and $1.6 million, respectively, which begin to expire in 2039 and 2033, respectively.

Utilization of the net operating loss carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 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. 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 completed a Section 382 study of transactions in its stock through January 25, 2021 and concluded that it had experienced ownership changes since inception that it believes under Section 382 and 383 of the Code will result in limitations on its ability to use certain pre-change NOLs and credits. In addition, the Company may experience subsequent ownership changes as a result of future equity offerings or other changes in the ownership of its stock, some of which are beyond the Company's control. As a result, the amount of the NOLs and tax credit carryforwards presented in these consolidated financial statements could be limited. Similar provisions of state tax law may also apply to limit the use of accumulated state tax attributes.

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 and research and development tax credit carryforwards. Management has considered the Company’s history of cumulative net losses incurred since inception and its lack of commercialization of any products or generation of any revenue from product sales since inception and concluded that it is more likely than not that the Company will not recognize the benefits of its federal and state deferred tax assets. Accordingly, a full valuation allowance has been established against the net deferred tax assets as of December 31, 2021 and 2020. The increase 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.

Changes in the valuation allowance were as follows:

	Year Ended December 31,
	2021		2020
Valuation allowance at the beginning of year	$	21,899	$	5,607
Decreases recorded as benefit to income tax provision		—		—
Increases recorded to income tax provision		41,647		16,292
Valuation allowance at the end of year	$	63,546	$	21,899

The Company’s policy is to record estimated interest and penalties related to uncertain tax positions in income tax expense. The Company has no amounts recorded for any unrecognized tax positions, accrued interest or penalties as of December 31, 2021 and 2020.

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 U.S. federal and state jurisdictions, where applicable. There are currently no pending tax examinations. The Company’s tax returns are open under statute from 2018 to the present.