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Income Taxes
 9 Months Ended 12 Months Ended
Sep. 30, 2023
Dec. 31, 2022
Income Tax Disclosure [Abstract]    
Income Taxes
13. Income Taxes
During the nine months ended September 30, 2023 and 2022, the Company recorded a full valuation allowance on federal and state deferred tax assets since management does not forecast the Company to be in a taxable position in the near future.
13. Income Taxes
No provision for income taxes was recorded for the years ended December 31, 2022 and 2021. The Company has incurred net operating losses only in the United States since its inception. The Company has not reflected any benefit of such net operating loss carryforwards in the financial statements.
A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate was as follows:
 
    
    Year Ended December 31,    
  
    
2022
    
2021
  
Federal statutory income tax rate ate
      21.00 %      21.00 % 
State taxes
      1.10       1.94  
Others
      (0.69 )      (0.26 ) 
Research and development credits
      1.11       1.01  
Cancellation of debt income
      —         —    
Tranche liability
      —         (3.06 ) 
Interest expense
      —         —    
Stock-based compensation
      (0.97 )      (0.96 ) 
Change in valuation allowance
      (21.55 )      (19.67 ) 
  
 
 
    
 
 
  
Provision for taxes
      0.00 %      0.00 % 
  
 
 
    
 
 
  
Net deferred tax assets and liabilities consisted of the following (in thousands):
 
    
Year Ended December 31,
  
    
2022
     
2021
  
Deferred tax assets:
      
Net operating
losses—non-current
    $ 15,940      $ 12,006  
Capitalized R&D
      13,815        —    
General business
credit—non-current
      5,699        2,682  
Operating lease
right-of-use
assets
      1,220        2,368  
Stock based compensation
      1,703        784  
Accruals and reserves
      735        525  
Fixed assets
      170        396  
Other
      3        2  
  
 
 
     
 
 
  
Gross deferred tax assets
      39,285        18,763  
Valuation allowance
      (38,110 )       (16,332 ) 
  
 
 
     
 
 
  
Net deferred tax assets
      1,175        2,431  
Fixed asset basis
      —          —    
  
 
 
     
 
 
  
Operating lease liabilities
      (1,175 )       (2,431 ) 
Other
      —          —    
Gross deferred tax liabilities
      (1,175 )       (2,431 ) 
Valuation allowance
    $ —        $ —    
Net operating losses and tax credit carryforwards were as follows as of December 31, 2022 (dollars in thousands):
 
    
Year Ended December 31, 2022
  
    
Amount
     
Expiration Years
  
Net operating losses, federal (starting from January 1, 2018)
    $ 75,730        Do Not Expire  
Net operating losses, state
      3,195        2039 - 2042  
Tax credits, federal
      5,309        2041 - 2042  
Tax credits, state
      592        Do Not Expire  
 
Utilization of the net operating loss carryforwards and research credit carryforwards may be subject to an annual limitation due to the ownership percentage change limitations provided by the Internal Revenue Code, as amended, (“IRC”), and similar state provisions. Annual limitations may result in the expiration of the net operating losses and tax credit carryforwards before they are utilized. The Company did not perform an IRC Section 382 analysis and any previous ownership changes may result in a limitation that will reduce the total amount of net operating loss and tax credit carryforwards disclosed that can be utilized. Subsequent ownership changes may affect the limitation in future years.
During the years ended December 31, 2022 and 2021, the Company recorded a full valuation allowance on federal and state deferred balances since management does not forecast the Company to be in a profitable position in the near future. Changes in the valuation allowance for deferred tax assets during the years ended December 31, 2022 and 2021 related primarily to the increases in net operating loss carryforwards and research and development tax credit carryforwards and were as follows (in thousands):
 
   
Year Ended December 31,
  
   
2022
       
2021
  
Valuation allowance at the beginning of the year
   $ 16,332        $ 2,414  
Increases recorded to income tax provision
     21,778          13,918  
 
 
 
       
 
 
  
Valuation allowance at the end of the year
   $ 38,110        $ 16,332  
 
 
 
       
 
 
  
The Company’s U.S. federal and state income tax returns are generally subject to tax examinations for the tax years from inception through December 31, 2021. There are currently no pending income tax examinations. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service and state tax authorities to the extent utilized in a future period.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
 
    
Year Ended December 31,
  
    
2022
       
2021
  
Balance at beginning of year
    $ 1,407        $ —    
Additions based on tax positions related to current year
      1,862          1,258  
Increase (reduction) for prior period positions
      (568 )         149  
  
 
 
       
 
 
  
Unrecognized tax benefit-December 31
    $ 2,701        $ 1,407  
  
 
 
       
 
 
  
The entire amount of the unrecognized tax benefits would not impact the Company’s effective tax rate if recognized. The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision. The Company has elected to include interest and penalties as a component of tax expense. During the years ended December 31, 2022 and 2021, the Company did not recognize accrued interest and penalties related to unrecognized tax benefits. The Company does not anticipate that the amount of existing unrecognized tax benefits will significantly increase or decrease during the next 12 months.