Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

12. Income Taxes

Due to the Company's net losses for 2022 and 2021, as well as the full valuation allowance on its net deferred tax assets as discussed below, the Company did not record any income tax expense or benefit for the years ended December 31, 2022 and 2021.

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

	YEAR ENDED DECEMBER 31,
	2022			2021
Income at US statutory rate		21.00	%		21.00	%
Permanent adjustments		(2.84	)%		(0.59	)%
Mark to market		18.29	%		(6.64	)%
State taxes, net of federal benefit		12.78	%		4.01	%
Valuation allowance		(56.79	)%		(19.86	)%
Tax credits		7.56	%		2.08	%
		—			—

Net deferred tax assets as of December 31, 2022 and 2021 consist of the following (in thousands):

	YEAR ENDED DECEMBER 31,
	2022			2021
Deferred tax assets:
Net operating losses	$	17,748		$	13,892
Intangibles		572			654
Accrued expenses and other		601			243
Deferred revenue		—			34
Lease liability		524			—
Stock Compensation		863			820
Capitalized R&D expenditures		4,931			—
Credits		4,755			2,850
Total deferred tax assets		29,994			18,493
Valuation allowance		(29,166	)		(18,493	)
Deferred tax assets		828			—
Deferred tax liabilities:
Right of use asset		(284	)		—
Other		(544	)		—
Total deferred tax liabilities		(828	)		—
Net deferred tax assets (liabilities)	$	—		$	—

As of December 31, 2022, the Company has gross federal and state net operating loss carryforwards of approximately $65.9 million and $61.9 million which begin to expire in 2027 and 2032, respectively. Additionally, the Company has $57.1 million of the federal net operating loss carryforwards that can be carried forward indefinitely.

As of December 31, 2022, the Company has gross federal and state tax credit carryforwards of approximately $3.4 million and $1.8 million, respectively, which begin to expire in 2036 and 2028, respectively.

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 and certain tax credits. Management has considered the Company’s history of cumulative net losses incurred since inception, as well as its lack of product revenue since inception, and has determined that it is more likely than not that the Company will not realize the benefits of its deferred tax assets. As a result, a full valuation allowance has been established at December 31, 2022 and 2021.

Section 382 of the Internal Revenue Code of 1986, as amended (“Section 382”), contains rules that limit the ability of a company that undergoes in ownership change to utilize its net operating losses (“NOLs”) and tax credits existing as of the date of such ownership change. Under the rules, such an ownership change is generally any change in ownership of more than 50% of a company’s stock within a rolling three-year period. The rules generally operate by focusing on changes in ownership of all stock considered by the rules as owning, directly or indirectly, 5% or more of the stock of a company and any change in ownership arising from new issuances of stock by the company. The Company has not yet determined if such a limitation would be placed against its available net operating losses. The Company will make such a determination prior to the utilization of any future net operating losses.

A summary of changes in the valuation allowance for deferred tax assets during the year ended December 31, 2022 and 2021 were as follows (in thousands):

	YEAR ENDED DECEMBER 31,
	2022		2021
Valuation allowance	$	18,493	$	11,318
Increases recorded to income tax provision		10,673		7,175
Decreases recorded to income tax provision		—		—
Valuation allowance	$	29,166	$	18,493

The Company files income tax returns in the United States and various state and local jurisdictions. The federal and state tax returns are generally subject to examination for the years ended December 31, 2014 through December 31, 2022. There are currently no pending tax examinations. To the extent the Company has tax attribute carryforwards, the tax year in which the attribute was generated may still be adjusted upon examination.