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

10.  Income Taxes

The income tax provision for the years ended December 31, 2021, 2020, and 2019 are as follows (in thousands):

 

For the Years Ended December 31,

 

 

2021

 

 

2020

 

 

2019

 

Current:

 

 

 

 

 

 

 

 

 

 

 

Federal

$

-

 

 

$

-

 

 

$

-

 

State

 

23

 

 

 

6

 

 

 

8

 

Total current

 

23

 

 

 

6

 

 

 

8

 

Deferred:

 

 

 

 

 

 

 

 

 

 

 

Federal

$

-

 

 

$

-

 

 

$

-

 

State

 

-

 

 

 

-

 

 

 

-

 

Total deferred

 

-

 

 

 

-

 

 

 

-

 

Total Provision

$

23

 

 

$

6

 

 

$

8

 

 

A reconciliation of income tax computed at the statutory federal income tax rate to the provision for income taxes included in the accompanying statements of operations for the Company is as follows:

 

 

 

For the Years Ended

 

 

 

December 31,

2021

 

 

December 31,

2020

 

 

December 31,

2019

 

Income tax provision at statutory rate

 

 

21

%

 

 

21

%

 

 

21

%

State income taxes, net of federal benefit

 

 

9

%

 

 

8

%

 

 

7

%

Tax credits

 

 

3

%

 

 

2

%

 

 

1

%

Stock compensation

 

 

5

%

 

 

(1

)%

 

 

0

%

Other

 

 

(1

)%

 

 

0

%

 

 

0

%

Change in valuation allowance

 

 

(37

)%

 

 

(30

)%

 

 

(29

)%

Effective income tax rate

 

 

0

%

 

 

0

%

 

 

0

%

 

For the years ended December 31, 2021, 2020, and 2019, the Company’s effective tax rate is below the federal statutory income tax rate of 21% primarily due to state income taxes, net of federal benefit and the Company’s position to establish a full valuation allowance on its deferred tax assets.

The tax effect of temporary differences and carryforwards that give rise to significant portions of the deferred tax assets and liabilities are presented below:

 

 

 

 

As of December 31,

 

 

 

2021

 

 

2020

 

Deferred tax assets:

 

 

 

 

 

 

 

 

Net operating loss carryforwards

 

$

45,231

 

 

$

27,511

 

Stock compensation

 

 

1,587

 

 

 

748

 

Research and development credits

 

 

4,593

 

 

 

2,414

 

Accruals and reserves

 

 

1,033

 

 

 

830

 

Operating lease liabilities

 

 

3,175

 

 

 

-

 

Total deferred tax assets

 

 

55,619

 

 

 

31,503

 

Valuation allowance

 

 

(52,728

)

 

 

(31,458

)

Deferred tax assets recognized

 

 

2,891

 

 

 

45

 

Deferred tax liabilities:

 

 

 

 

 

 

 

 

  Right-of-use assets

 

 

(2,854

)

 

 

-

 

  Fixed assets and depreciation

 

 

(37

)

 

 

(45

)

Total deferred tax liabilities

 

 

(2,891

)

 

 

(45

)

Net deferred tax assets

 

$

-

 

 

$

-

 

 

The Company has recorded a valuation allowance for its deferred tax assets that it does not believe will be realizable at a more likely than not level based on analysis of all available sources of taxable income.

As of December 31, 2021 and 2020, the Company had federal net operating loss carryforwards of $159,886 and $97,665, respectively. As of December 31, 2021, the Company had state net operating loss carryforwards for New Jersey, California and Massachusetts of approximately $154,972, $4,912, and $4,640 respectively. At December 31, 2020, the Company had state net operating loss carryforwards for New Jersey, California and Massachusetts of approximately $92,805, $4,912 and $950, respectively.  Federal net operating loss carryforwards of $27,515 expire beginning in the year 2033. State net operating loss carryforwards begin to expire in the year

2033.  Net operating loss carryforwards related to tax years after 2017 of $132,371 do not expire. The Company also has federal and state research and development credit carryforward of approximately $6,588 and $3,470 as of December 31, 2021 and 2020, respectfully. The federal credits will begin to expire in 2034 if not utilized.  The California state credits carryforward indefinitely and the New Jersey state credits expire starting in 2022. The above net operating losses and research and development credits are subject to Sections 382 and 383 of the Internal Revenue Code. In the event of a change in ownership as defined by these code sections, the usage of the net operating losses and research and development credits may be limited.

The Company accrues interest and penalties related to unrecognized tax benefits in the Provision for income taxes line item in the statements of operations and comprehensive loss. As of December 31, 2021 and 2020, the Company had not accrued any interest or penalties related to uncertain tax positions.

If the ending balance of $1,654 and $877 of unrecognized tax benefits as of December 31, 2021 and 2020, respectively, were recognized, none of the recognition would affect the income tax rate. The following table summarized the activity related to the Company’s unrecognized tax benefits:

 

 

 

For the Years Ended

 

 

 

December 31,

2021

 

 

December 31,

2020

 

Unrecognized tax benefits, beginning of year

 

$

877

 

 

$

543

 

Increases related to prior year tax positions

 

 

43

 

 

 

5

 

Increases related to current year tax positions

 

 

734

 

 

 

329

 

Unrecognized tax benefits, end of year

 

$

1,654

 

 

$

877

 

 

The Company does not anticipate any material change in its unrecognized tax benefits over the next twelve months. The unrecognized tax benefits may change during the next year for items that arise in the ordinary course of business.

The Company files U.S. federal and state income tax returns with varying statutes of limitations. The Company’s tax years 2013 to 2021 will remain open for examination by the federal and state authorities for three and four years, respectively, from the date of utilization of any net operating loss credits.