XML 60 R21.htm IDEA: XBRL DOCUMENT v3.25.1
Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes

10. Income Taxes

The effective income tax rate differed from the amount computed by applying the federal statutory rate to the Company’s loss before income taxes for the years ended December 31, 2024 and 2023 as follows:

 

 

December 31,

 

 

2024

 

 

2023

 

Tax effected at statutory rate

 

 

21.0

%

 

 

21.0

%

State taxes

 

 

7.2

%

 

 

6.0

%

Stock-based compensation

 

 

(1.0

%)

 

 

(1.3

%)

Executive compensation

 

 

(2.2

%)

 

 

(1.7

%)

Federal research and development credits

 

 

6.0

%

 

 

4.4

%

Change in valuation allowance

 

 

(31.1

%)

 

 

(28.5

%)

Total

 

 

(0.1

%)

 

 

(0.1

%)

 

The Company's total deferred tax assets consisted of the following as of December 31, 2024 and 2023 (in thousands):

 

 

December 31,

 

 

2024

 

 

2023

 

Deferred Tax Assets

 

 

 

 

 

 

Net operating loss carryforward

 

$

15,668

 

 

$

9,395

 

R&D credit carryovers

 

 

9,991

 

 

 

3,985

 

Section 174 R&D amortization

 

 

25,763

 

 

 

13,819

 

Operating lease liabilities

 

 

904

 

 

 

1,134

 

Accrued expenses and other current liabilities

 

 

1,411

 

 

 

919

 

Capitalized licenses

 

 

3,259

 

 

 

3,482

 

Other

 

 

926

 

 

 

554

 

 

 

57,922

 

 

 

33,288

 

Valuation allowance

 

 

(56,650

)

 

 

(31,761

)

Deferred tax asset

 

 

1,272

 

 

 

1,527

 

Deferred Tax Liabilities

 

 

 

 

 

 

Property and equipment

 

 

(408

)

 

 

(457

)

Operating lease right-of-use assets

 

 

(864

)

 

 

(1,070

)

Deferred tax liability

 

 

(1,272

)

 

 

(1,527

)

Net deferred tax asset

 

$

—

 

 

$

—

 

 

The Company has had no income tax expense due to operating losses incurred since inception. ASC 740, Income Taxes, requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. Based on this, the Company has provided a valuation allowance for the full amount of the net deferred tax assets as the realization of the deferred tax assets is not determined to be more likely than not. During 2024, the valuation allowance increased by $24.9 million primarily due to the increase in the Company's book loss reported in the period and the generation of additional research and development credits.

As of December 31, 2024, the Company had $55.0 million and $62.4 million of federal and state net operating loss carryforwards (“NOLs”), respectively. The federal NOLs are not subject to expiration and the state NOLs begin to expire in 2038. These loss

carryforwards are available to reduce future federal and state taxable income, if any. As of December 31, 2024, the Company also has federal and state research and development tax credit carryforwards of approximately $7.9 million and $2.1 million, respectively, to offset future income taxes, which will begin to expire beginning in December 2026. These loss carryforwards are subject to review and possible adjustment by the appropriate taxing authorities. The amount of loss carryforwards that may be utilized in any future period may be limited based upon changes in the ownership of the Company's ultimate parent.

The 2017 Tax Cuts and Jobs Act (“TCJA”) included a multitude of tax provisions, including several deferred changes that became effective for tax years ending after December 31, 2021. Included in the provisions was the TCJA’s amendment to Section 174, which now requires U.S.-based and non-U.S-based research and experimental (“R&E”) expenditures to be capitalized and amortized over a period of five or 15 years, respectively, for amounts paid in tax years starting after December 31, 2021. Prior to the TCJA amendment, Section 174 allowed taxpayers to either immediately deduct R&E expenditures in the year paid or incurred. The Company has applied this required change in accounting method beginning in 2022.

The Company follows the provisions of ASC 740-10, Accounting for Uncertainty in Income Taxes, which specifies how tax benefits for uncertain tax positions are to be recognized, measured, and recorded in financial statements; requires certain disclosures of uncertain tax matters; specifies how reserves for uncertain tax positions should be classified on the consolidated balance sheets; and provides transition and interim period guidance, among other provisions. As of December 31, 2024 and 2023, the Company has not recorded tax reserves associated with any unrecognized tax benefits. The Company’s policy is to recognize interest and penalties accrued on any uncertain tax positions as a component of income tax expense, if any, in its consolidated statements of operations and comprehensive loss. As of December 31, 2024, and 2023, the Company had no reserves for uncertain tax positions. For the years ended December 31, 2024 and 2023, no estimated interest or penalties were recognized on uncertain tax positions.

The Company has not conducted a study of its research and development credit carryforwards. This study may result in an adjustment to research and development credit carryforwards; however, until a study is completed, and any adjustment is known, no amounts are being presented as an uncertain tax position. A full valuation allowance has been provided against the Company’s research and development credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance. Thus, there would be no impact to the consolidated balance sheets or consolidated statements of operations and comprehensive loss if an adjustment were required.

The Company's federal and Massachusetts income tax returns for the years ended December 31, 2021 to December 31, 2024 remain open and are subject to examination by the Internal Revenue Service and state taxing authorities. In addition, the Company’s tax carryover attributes such as net operating losses or credits from earlier periods are also subject to examination.