XML 46 R22.htm IDEA: XBRL DOCUMENT v3.22.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes

11. Income Taxes

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. The Company’s policy is to recognize interest and penalties related to income tax matters as tax expense. The Company had no accrued interest or penalties related to income tax matters on its balance sheets at December 31, 2021 or 2020. and has not recognized interest or penalties in its statements of operations and comprehensive loss for the years ended December 31, 2021 and 2020, respectively. Further, the Company is not currently under examination by any federal, state or local tax authority.

At December 31, 2021, the Company had federal and state net operating loss (“NOL”) carryforwards of $40.3 million and $10.4 million, respectively. Federal NOL carryforwards totaling $0.1 million begin to expire in 2037, unless previously utilized, and federal NOL carryforwards of $40.2 million generated after 2017, may be carryforward indefinitely but can only be utilized to offset 80% of future taxable income. State NOL carryforwards totaling $10.4 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 $0.9 million and $0.6 million, respectively. The federal R&D credit carryforwards will begin to expire in 2038 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 common 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 completed a study to assess whether an ownership change had occurred from the Company's formation through December 31, 2021. Based upon the study, the Company determined that it had experienced multiple ownership

changes during 2020, causing the annual utilization of the NOL and credit carryforwards to be limited. The Company does not believe any of the NOL and credit carryforwards generated through December 31, 2021 would expire solely as a result of annual limitations on the utilization of those attributes. If ownership changes 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.

Significant components of the Company's net deferred tax assets at December 31, 2021 and 2020 were as follows (in thousands):

 

 

 

December 31,
2021

 

 

December 31,
2020

 

Deferred tax assets:

 

 

 

 

 

 

Net operating losses

 

$

9,171

 

 

$

2,836

 

Research and development credits

 

 

1,013

 

 

 

153

 

Lease liability

 

 

763

 

 

 

—

 

Stock-based compensation

 

 

532

 

 

 

25

 

Other

 

 

515

 

 

 

196

 

Total gross deferred tax assets

 

 

11,994

 

 

 

3,210

 

Valuation allowance

 

 

(11,235

)

 

 

(3,177

)

Total deferred tax assets

 

 

759

 

 

 

33

 

Deferred tax liabilities:

 

 

 

 

 

 

Right of use asset

 

 

(759

)

 

 

—

 

Other

 

 

—

 

 

 

(33

)

Total deferred tax liabilities

 

 

(759

)

 

 

(33

)

Net deferred tax assets

 

$

—

 

 

$

—

 

 

A reconciliation of the Company's income tax expense (benefit) to the amount computed by applying the federal statutory income tax rate for the periods presented were as follows (in thousands):

 

 

 

December 31,
2021

 

 

December 31,
2020

 

Expected tax benefit at federal statutory rate

 

$

(7,451

)

 

$

(1,738

)

State income taxes, net of federal benefit

 

 

(4

)

 

 

(552

)

Debt financing

 

 

—

 

 

 

6

 

Research and development credits

 

 

(836

)

 

 

(71

)

Other

 

 

317

 

 

 

174

 

Change in valuation allowance

 

 

7,974

 

 

 

2,181

 

Provision for income taxes

 

$

—

 

 

$

—

 

 

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. The Company does not expect that there will be a significant change in the unrecognized tax benefits over the next twelve months. 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 unrecognized tax benefits for the periods presented (in thousands):

 

 

 

December 31,
2021

 

 

December 31,
2020

 

Balance at beginning of period

 

$

15

 

 

$

9

 

Increase related to prior year tax positions

 

 

1

 

 

 

—

 

Increase to current year tax positions

 

 

402

 

 

 

6

 

Balance at end of period

 

$

418

 

 

$

15