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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes

12. INCOME TAXES

The effective income tax rate differed from the amount computed by applying the federal statutory rate to the Company’s loss before income taxes as follows:

 

 

 

Year Ended December 31,

 

 

 

2021

 

 

2020

 

Tax effected at statutory rate

 

 

21.0

%

 

 

21.0

%

State taxes

 

 

7.4

%

 

 

5.2

%

Stock compensation

 

 

(0.7

)%

 

 

(0.4

)%

Non-deductible expenses

 

 

(0.5

)%

 

 

—

%

Acquired in-process R&D

 

 

—

%

 

 

(5.1

)%

Federal research and development credits

 

 

5.0

%

 

 

3.2

%

Change in valuation allowance

 

 

(32.2

)%

 

 

(23.9

)%

Total

 

 

—

%

 

 

—

%

 

The Company’s total deferred tax assets are as follows (in thousands):

 

 

 

As of December 31,

 

 

 

2021

 

 

2020

 

Deferred tax assets:

 

 

 

 

 

 

Federal net operating loss carryforward

 

$

18,233

 

 

$

5,445

 

State net operating loss carryforward

 

 

5,269

 

 

 

1,593

 

R&D credit carryforwards

 

 

6,385

 

 

 

4,023

 

Capitalized start-up costs

 

 

242

 

 

 

264

 

Accruals and reserves

 

 

629

 

 

 

327

 

Deferred revenue

 

 

6,769

 

 

 

15,234

 

Stock options

 

 

1,026

 

 

 

318

 

Lease liability

 

 

1,908

 

 

 

—

 

Total deferred tax asset

 

 

40,461

 

 

 

27,204

 

Deferred tax liability:

 

 

 

 

 

 

Fixed assets

 

 

(648

)

 

 

(170

)

Right of use asset

 

 

(1,786

)

 

 

—

 

Total deferred tax liability

 

 

(2,434

)

 

 

(170

)

Valuation Allowance

 

 

(38,027

)

 

 

(27,034

)

Net deferred tax assets and liability

 

$

—

 

 

$

—

 

 

The Company has had no income tax expense due to operating losses incurred since inception. ASC 740 requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. Based on this, the Company has provided a valuation allowance for the full amount of the net deferred tax assets as the realization of the deferred tax assets is not determined to be more likely than not. During 2021, the valuation allowance increased by $11.0 million primarily due to the increase in the Company's book loss reported in the period.

As of December 31, 2021, the Company had approximately $86.8 million and $83.4 million of Federal and State operating loss carryforwards respectively. The Federal net operating losses are not subject to expiration and the state net operating losses begin to expire in 2037. These loss carryforwards are available to reduce future federal taxable income, if any. As of December 31, 2021, the Company also has federal and state research and development tax credit carryforwards of approximately $5.0 million and $1.7 million respectively, to offset future income taxes, which will begin to expire beginning in December 2031. These loss carryforwards are subject to review and possible adjustment by the appropriate taxing authorities. The amount of loss carryforwards that may be utilized in any future period may be limited based upon changes in the ownership of the company's ultimate parent.

The Company follows the provisions of ASC 740-10, Accounting for Uncertainty in Income Taxes, which specifies how tax benefits for uncertain tax positions are to be recognized, measured, and recorded in financial statements;

requires certain disclosures of uncertain tax matters; specifies how reserves for uncertain tax positions should be classified on the balance sheet; and provides transition and interim period guidance, among other provisions. As of December 31, 2021, and 2020, the Company has not recorded tax reserves associated with any unrecognized tax benefits. The Company’s policy is to recognize interest and penalties accrued on any uncertain tax positions as a component of income tax expense, if any, in its statements of income. As of December 31, 2021, and 2020, the Company had no reserves for uncertain tax positions. For the years ended December 31, 2021 and 2020, no estimated interest or penalties were recognized on uncertain tax positions.

The Company has not conducted a study of its research and development credit carryforwards. This study may result in an adjustment to research and development credit carryforwards; however, until a study is completed, and any adjustment is known, no amounts are being presented as an uncertain tax position. A full valuation allowance has been provided against the Company’s research and development credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance. Thus, there would be no impact to the balance sheets or statements of operations if an adjustment were required.

The Company's Federal and Massachusetts income tax returns for the years ended December 31, 2018 to December 31, 2021 remain open and are subject to examination by the Internal Revenue Service and state taxing authorities.