XML 43 R16.htm IDEA: XBRL DOCUMENT v3.22.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income taxes

10. Income taxes

A reconciliation of the expected income tax expense (benefit) computed using the federal statutory income tax rate the Company’s effective income tax rate is as follows:

 

 

 

Year ended December 31,

 

 

 

 

2021

 

 

2020

 

 

Expected income tax benefit at the federal statutory rate

 

 

21.0

 

%

 

21.0

 

%

State income taxes, net of federal benefit

 

 

7.9

 

 

 

8.3

 

 

Non-deductible items

 

 

0.4

 

 

 

6.2

 

 

Research and development credit, net

 

 

4.1

 

 

 

1.2

 

 

Other

 

 

0.0

 

 

 

0.2

 

 

Change in valuation allowance

 

 

(33.4

)

 

 

(36.9

)

 

Total

 

 

0.0

 

%

0.0

 

%

 

The principal components of the Company’s deferred tax assets and liabilities consist of the following:

 

 

 

As of December 31,

 

 

 

2021

 

 

2020

 

Deferred tax assets:

 

 

 

 

 

 

 

 

Federal and state net operating loss carryforwards

 

$

52,231

 

 

$

32,097

 

Research and development tax credits

 

 

7,726

 

 

 

2,816

 

Other

 

 

6,075

 

 

 

2,293

 

Gross deferred tax assets

 

 

66,032

 

 

 

37,206

 

Less: valuation allowance

 

 

(66,032

)

 

 

(37,206

)

Net deferred tax assets

 

$

—

 

 

$

—

 

 

As of December 31, 2021 and 2020, the Company had federal net operating loss carryforwards of $191.1 million and $116.9 million, respectively, which may be available to reduce future taxable income, and expire at various dates beginning in 2034, for those net operating loss carryforwards generated prior to 2018. Net operating losses generated in 2018 and beyond have no expiration. As of December 31, 2021 and 2020, the Company had state net operating loss carry forwards of $191.4 million and $118.8 million, respectively, which may be available to reduce future taxable income and expire at various dates beginning in 2034. In addition, at December 31, 2021 and 2020, the Company had federal research and development tax credit carryforwards of $5.4 million and $2.0 million, respectively, and state research and development tax credit carry forwards of $3.0 million and $1.0 million, respectively.  Both federal and state research and development tax credit carry forwards may be available to reduce future tax liabilities and expire at various dates beginning in 2030. In accordance with ASC 740, Accounting for Income Taxes, 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. Management has determined that it is more likely than not that the Company will not recognize the benefits of federal and state deferred tax assets and, as a result, a full valuation allowance of $66.0 million and $37.2 million was established at December 31, 2021 and 2020, respectively. The change in the valuation allowance was an increase of $28.8 million and $19.3 million in 2021 and 2020, respectively.

 

 

The CARES Act temporarily repealed the 80% taxable income limitation for tax years beginning before January 1, 2021. Federal NOL carry forwards generated from 2018 or later and Federal NOL carryforwards to taxable years beginning after December 31, 2021 will be subject to the 80% limitation. Also, under the CARES Act, federal NOLs arising in 2018, 2019 and 2020 can be carried back 5 years. New legislation or regulation which could affect our tax burden could be enacted by any governmental authority. The Company cannot predict the timing or extent of such tax-related developments which could have a negative impact on our financial results. Additionally, the Company uses its best judgment in attempting to quantify and reserve for these tax obligations.

 

Utilization of the net operating loss carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the Code) 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. The Company has not conducted a formal study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception due to the significant complexity and cost associated with such a study. If the Company has experienced a change of control, as defined for purposes of Section 382 and 383 of the Code, at any time since inception, utilization of the net operating loss carryforwards or research and development tax credit carryforwards may be subject to an annual limitation under Section 382 and 383 of the Code, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required. Any limitation may result in expiration of a portion of the net operating loss carryforwards or research and development tax credit carryforwards before utilization.

The Company applies ASC 740 related to accounting for uncertainty in income taxes. The Company’s reserves related to income taxes are based on a determination of whether, and how much of, a tax benefit taken by the Company in its tax filings or positions is more likely than not to be realized following resolution of any potential contingencies present related to the tax benefit. At December 31, 2021, and 2020 the Company had no unrecognized tax benefits. Interest and penalty charges, if any, related to unrecognized tax benefits would be classified as income tax expense in the accompanying consolidated statements of operations and comprehensive loss.