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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes

10. INCOME TAXES

 

For financial reporting purposes, loss before provision for income taxes includes the following components (in thousands):

 

 

December 31,

 

 

 

2024

 

 

2023

 

Domestic

 

$

(152,147

)

 

$

(95,989

)

Foreign

 

 

—

 

 

 

—

 

Loss before income taxes

 

$

(152,147

)

 

$

(95,989

)

 

Provision for Income Taxes

 

The provision for income taxes consisted of the following (in thousands):

 

 

December 31,

 

 

 

2024

 

 

2023

 

Current:

 

 

 

 

 

 

Federal

 

$

—

 

 

$

—

 

State

 

 

1

 

 

 

1

 

Total current

 

 

1

 

 

 

1

 

Total deferred

 

 

—

 

 

 

—

 

Provision for income taxes

 

$

1

 

 

$

1

 

 

A reconciliation of the provision for income taxes computed using the U.S. statutory federal income tax rate compared to the income tax provision included in the statement of operations and comprehensive loss is as follows (in thousands):

 

 

December 31,

 

 

 

2024

 

 

2023

 

Tax on U.S. statutory rate on income before income taxes

 

$

(31,951

)

 

$

(20,158

)

State taxes

 

 

(1,010

)

 

 

(489

)

State valuation allowance

 

 

1,011

 

 

 

490

 

Federal valuation allowance

 

 

34,449

 

 

 

21,250

 

Tax credits

 

 

(1,294

)

 

 

(1,598

)

Stock based compensation

 

 

(1,845

)

 

 

—

 

Other

 

 

641

 

 

 

506

 

Provision for income taxes

 

$

1

 

 

$

1

 

 

Deferred Tax Assets and Liabilities

 

Deferred tax assets and liabilities are determined based on the differences between financial reporting and income tax bases of assets and liabilities, as well as net operating loss carryforwards and are measured using the enacted tax rates and laws in effect when the differences are expected to reverse. The significant components of the Company’s net deferred tax assets and liabilities are as follows (in thousands):

 

 

December 31,

 

 

 

2024

 

 

2023

 

Deferred tax assets:

 

 

 

 

 

 

Federal and state NOL carryforward

 

$

38,736

 

 

$

27,539

 

Research and other credits

 

 

8,190

 

 

 

6,051

 

Capitalized R&D

 

 

46,225

 

 

 

25,264

 

Fixed assets

 

 

5

 

 

 

3

 

Reserves and accruals

 

 

1,310

 

 

 

755

 

Stock based compensation

 

 

4,311

 

 

 

2,978

 

Other intangibles

 

 

7,641

 

 

 

8,313

 

Other DTA

 

 

400

 

 

 

384

 

Lease liability

 

 

831

 

 

 

804

 

Total gross DTA

 

 

107,649

 

 

 

72,091

 

Less: valuation allowance

 

 

(106,857

)

 

 

(71,372

)

Total deferred tax assets

 

 

792

 

 

 

719

 

Deferred tax liabilities:

 

 

 

 

 

 

Right of use

 

 

(709

)

 

 

(619

)

Other DTL

 

 

(83

)

 

 

(100

)

Total gross DTL

 

 

(792

)

 

 

(719

)

Net deferred tax assets

 

$

—

 

 

$

—

 

 

As of December 31, 2024, the Company has federal and state net operating loss carryforwards of $171.8 million and $37.5 million, respectively, of which $10.2 million of federal net operating loss carryforwards and $37.0 million of state net operating carryforwards will begin expiring in the year 2032 and 2036, respectively, if not utilized. The Company also has $161.5 million of federal net operating loss carryforwards as of December 31, 2024 that do not expire. The Company has $7.0 million of federal research and development tax credit carryforwards, which begin to expire in the year 2037. The Company has $3.2 million of state research and development tax credit carryforwards, which have no expiration date.

Utilization of the federal and state net operating loss and tax credit carryforwards may be subject to a substantial annual limitation due to the “change in ownership” provisions of the Internal Revenue Code of 1986. The annual limitation may result in the expiration of net operating losses and credits before utilization. The Company has not performed an analysis to determine if such ownership changes have occurred. An analysis will be performed prior to recognizing the benefits of any losses or credits in the financial statements.

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. Based on the weight of all evidence including a history of operating losses, management has determined that it is not more likely than not that the net deferred tax assets will be realized. A valuation allowance of $106.9 million and $71.4 million as of December 31, 2024 and 2023, respectively, has been established to offset the deferred tax assets as realization of such assets is uncertain. The valuation allowance increased by $35.5 million and $21.8 million during the years ended December 31, 2024 and 2023, respectively.

 

Uncertain Tax Benefits

 

The Company has the following activity relating to the gross amount of unrecognized tax benefits (in thousands):

 

 

Year Ended December 31,

 

 

 

2024

 

 

2023

 

Beginning balance

 

$

1,513

 

 

$

941

 

Additions based on tax positions related to prior year

 

 

—

 

 

 

—

 

Decreases based on tax positions related to prior year

 

 

—

 

 

 

—

 

Additions based on tax positions related to current year

 

 

535

 

 

 

572

 

Ending balance

 

$

2,048

 

 

$

1,513

 

 

The Company accounts for income taxes in accordance with authoritative accounting guidance which states the impact of an uncertain income tax position is recognized at the largest amount that is “more likely than not” to be sustained upon audit by the relevant taxing authority. An uncertain tax position will not be recognized if it has less than a 50% likelihood of being sustained. None of these uncertain tax positions will impact the Company’s effective tax rate if assessed. The Company’s policy is to classify interest and penalties associated with unrecognized tax benefits as income tax expense. The Company had no interest or penalty accruals associated with uncertain tax benefits in its balance sheet and statement of operations for the years ended December 31, 2024 and 2023. The Company files income tax returns in the U.S. and various states. The Company is not currently under examination by any major tax

jurisdictions nor has it been in the past. Because of net operating losses and research credit carryovers, substantially all of our tax years remain open to examination. Although it is reasonably possible that certain unrecognized tax benefits may increase or decrease within the next 12 months due to tax examination changes, settlement activities, expirations of statute of limitations, or the impact on recognition and measurement considerations related to the results of published tax cases or other similar activities, the Company does not anticipate any significant changes to unrecognized tax benefits over the next 12 months.