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

11. Income Taxes

A reconciliation of the Company's statutory income tax rate to the Company’s effective income tax rate is as follows for the years ended December 31, 2024, and December 31, 2023:

 

 

Year Ended

 

 

 

December 31,

 

 

 

2024

 

 

2023

 

Federal statutory rate

 

 

21.00

%

 

 

21.00

%

State Taxes, net of federal benefit

 

 

10.72

 

 

 

10.80

 

Change in valuation allowance

 

 

(33.98

)

 

 

(36.12

)

Permanent differences

 

 

(0.51

)

 

 

(0.36

)

Tax credits

 

 

3.73

 

 

 

4.80

 

Other

 

 

(0.96

)

 

 

(0.12

)

Effective income tax rate

 

 

0.00

%

 

 

0.00

%

The principal components of the Company's deferred tax assets and liabilities at December 31, 2024 and December 31, 2023 are as follows:

 

 

Year Ended

 

 

 

December 31,

 

 

 

2024

 

 

2023

 

Deferred tax assets:

 

 

 

 

 

 

Net operating loss carryforwards

 

$

33,295

 

 

$

21,904

 

Tax credits

 

 

10,743

 

 

 

7,070

 

Intangibles

 

 

5,918

 

 

 

4,241

 

Capitalized R&D expenses

 

 

39,338

 

 

 

25,127

 

Lease liabilities

 

 

2,818

 

 

 

3,244

 

Other deferred tax assets

 

 

6,292

 

 

 

3,753

 

Total deferred tax assets

 

 

98,404

 

 

 

65,339

 

Valuation allowance

 

 

(95,426

)

 

 

(61,974

)

Net deferred tax assets

 

$

2,978

 

 

$

3,365

 

 

 

 

Year Ended

 

 

 

December 31,

 

 

 

2024

 

 

2023

 

Deferred tax liabilities:

 

 

 

 

 

 

Right of use asset

 

$

(2,663

)

 

$

(3,102

)

Other deferred tax liabilities

 

 

(315

)

 

 

(263

)

Total deferred tax liabilities

 

 

(2,978

)

 

 

(3,365

)

Net deferred tax assets (liabilities)

 

$

-

 

 

$

-

 

As of December 31, 2024 and 2023, the Company had federal net operating loss ("NOL") carryforwards of approximately $106.4 million and $70.2 million, respectively, which can be carried forward indefinitely. As of December 31, 2024 and December 31, 2023, the Company had state and local net operating loss carryforwards of approximately $212.7 million and $139.3 million, respectively, which begin to expire in 2040.

As of December 31, 2024 and December 31, 2023, the Company had federal tax credits of $10.7 million and $7.1 million, respectively, which begin to expire in 2040.

Future realization of the tax benefits of existing temporary differences and net operating loss carryforwards ultimately depends on the existence of sufficient taxable income within the carryforward period. As of December 31, 2024 and December 31, 2023, the Company performed an evaluation to determine whether a valuation allowance was needed. The Company considered all available evidence, both positive and negative, which included the results of operations for the current and preceding years. The Company determined that it was not possible to reasonably quantify future taxable income and determined that it is more likely than not that all of the deferred tax assets will not be realized. Accordingly, the Company maintained a full valuation allowance as of December 31, 2024 and December 31, 2023.

The utilization of NOLs and tax credit carryforwards to offset future taxable income may be subject to an annual limitation as a result of ownership changes that have occurred previously or may occur in the future. Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, (the “IRC”), a corporation that undergoes an ownership change may be subject to limitations on its ability to utilize its pre-change NOLs and other tax attributes otherwise available to offset future taxable income and/or tax liability. An ownership change is defined as a cumulative change of 50% or more in the ownership positions of certain stockholders during a rolling three-year period.

The Company conducted an ownership analysis under IRC Section 382 as of September 30, 2024 and determined the Company experienced an ownership change associated with the closing of the Company's IPO on November 7, 2023 that limits the Company’s NOLs and tax credits. As a result of the ownership change, the Company is limited to a $1,689,195 annual limitation on its ability to utilize its NOLs and tax credits recognized prior to the ownership change. Due to this limitation, no federal NOLs are expected to expire unutilized and $2.9 million of federal tax credits that had been available to offset future tax liabilities, prior to the date of the ownership change, will expire unutilized. As a result, during the year ended December 31, 2024, the Company reduced its deferred tax assets related to the federal tax credits, which was offset by a corresponding decrease in the valuation allowance.

The calculation of the Company's tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations for both federal taxes and the many states in which it operates or does business in. ASC 740 states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits.

The Company records uncertain tax positions as liabilities in accordance with ASC 740 and adjusts these liabilities when its judgment changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company's current estimate of the unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available. As of December 31, 2024 and December 31, 2023, the Company has not recorded any uncertain tax positions in its financial statements.

The Company recognizes interest and penalties related to uncertain tax positions on the income tax expense line in the accompanying statements of operations. As of December 31, 2024 and December 31, 2023, no accrued interest or penalties are included on the related tax liability line in the balance sheet.

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. The resolution of tax matters is not expected to have a material effect on the Company's financial statements.