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

NOTE 16. INCOME TAXES

The Company did not record a provision or benefit for income taxes for the years ended December 31, 2024 and 2023. The components of the net deferred tax asset as of December 31, 2024 and 2023 are as follows:

 

 

 

December 31,

 

 

 

2024

 

 

2023

 

 

 

(In thousands)

 

Deferred tax assets:

 

 

 

 

 

 

Net operating loss carryforwards

 

$

107,698

 

 

$

29,290

 

Research and development tax credits

 

 

19,379

 

 

 

13,133

 

Capitalized research and development costs*

 

 

97,294

 

 

 

49,156

 

Stock-based compensation

 

 

13,172

 

 

 

7,307

 

Accrued bonus

 

 

4,116

 

 

 

1,124

 

Lease liability

 

 

930

 

 

 

1,035

 

Other

 

 

—

 

 

 

367

 

Total deferred tax assets

 

 

242,589

 

 

 

101,412

 

Deferred tax liabilities:

 

 

 

 

 

 

Right of use asset

 

 

(853

)

 

 

(931

)

Other

 

 

(3,591

)

 

 

—

 

Total deferred tax liabilities

 

 

(4,444

)

 

 

(931

)

Valuation allowance

 

 

(238,145

)

 

 

(100,481

)

Net deferred tax assets

 

$

—

 

 

$

—

 

*Capitalized costs deferred tax asset includes research and development capitalized expenditures of $24.8 million under IRC 59(e) and $70.4 million under IRC 174.

A reconciliation between the Company’s effective tax rate and the federal statutory rate for the years ended December 31, 2024 and 2023 are as follows:

 

 

 

December 31,

 

 

2024

 

2023

Federal statutory rate

 

21.00%

 

21.00%

State income taxes, net of federal tax benefit

 

5.06%

 

4.84%

Acquired IPR&D

 

(19.65)%

 

0.00%

Stock based compensation

 

(0.31)%

 

(1.33)%

Tax credits

 

0.72%

 

3.05%

True-up

 

0.04%

 

(3.42)%

Acquisition

 

10.25%

 

0.00%

Change in rate

 

6.49%

 

(4.41)%

Other items

 

0.66%

 

0.07%

Valuation allowance

 

(24.26)%

 

(19.80)%

Effective tax rate

 

0.00%

 

0.00%

As of December 31, 2024, the Company had federal net operating loss carryforwards of approximately $194.3 million and state net operating loss carryforwards of approximately $270.3 million. The federal net operating losses have an unlimited carryover period and state net operating losses begin to expire in 2038.

As of December 31, 2024, the Company had federal research and development tax credit carryforwards of approximately $13.9 million and state research and development tax credit carryforwards of approximately $2.9 million. The federal research and development tax credits begin to expire in 2039 and state research and development tax credits have an unlimited carryover period.

As of December 31, 2024, the Company had federal orphan drug tax credit carryforwards of approximately $9.9 million. The federal orphan drug tax credits begin to expire in 2042.

All of the federal and state net operating losses may be subject to change of ownership limitations provided by the Internal Revenue Code and similar state provisions. An annual loss limitation may result in the expiration or reduced utilization of the net operating losses.

Under Sections 382 and 383 of the Code, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50 percentage-point cumulative change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change NOL carryforwards

and other pre-change tax attributes to offset its post-change income or taxes may be limited. As a result of AnHeart Therapeutics, Inc.'s previous mergers with AnHeart Hangzhou in March 2019 and AnHeart Ltd (Cayman) in September 2021, we are subject to the Section 382 limitation. Our utilization of these pre-merger NOL and tax credit carryforwards is limited to the amount of income that the related entity contributes to our consolidated taxable income.

As of December 31, 2024, the Company maintained a full valuation allowance on its net deferred tax assets. The valuation allowance was determined in accordance with the provisions of ASC 740, Accounting for Income Taxes, which requires an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. Such assessment is required on a jurisdiction by jurisdiction basis. The Company’s history of cumulative losses, along with expected future U.S. losses required that a full valuation allowance be recorded against all net deferred tax assets. The Company intends to maintain a full valuation allowance on net deferred tax assets until sufficient positive evidence exists to support reversal of the valuation allowance.

As of December 31, 2024, the Company’s total amount of unrecognized tax benefits was $7.4 million, none of which would impact the Company’s effective tax rate, if recognized. The Company does not anticipate that the amount of unrecognized tax benefit will significantly increase within the next 12 months.

For the years ended December 31, 2024 and 2023, the activity related to the unrecognized tax benefits were as follows (in thousands):

 

 

 

Years Ended December 31,

 

 

 

2024

 

 

2023

 

Unrecognized tax benefits at beginning of year

 

$

5,629

 

 

$

5,068

 

Gross increases - current year tax positions

 

 

1,788

 

 

 

1,019

 

Gross decreases - prior year tax positions

 

 

(26

)

 

 

(458

)

Unrecognized tax benefits at end of year

 

$

7,391

 

 

$

5,629

 

 

 

 

 

 

 

 

The Company is subject to taxation in the United States and various state jurisdictions. All tax years remain subject to examination for U.S. federal and state purposes. All net operating losses generated to date are subject to adjustment for U.S. federal and state purposes. The Company is not currently under examination in federal or state jurisdictions.