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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes
10.
Income Taxes

The Company’s consolidated financial statements include a tax expense of $0.2 million and $0.1 million on (loss) income before taxes of $21.1 million and $67.2 million for the years ended December 31, 2024 and 2023, respectively. The income tax expense consisted of the following (dollars in thousands):

 

 

Years Ended December 31,

 

 

 

2024

 

 

2023

 

Current expense:

 

 

 

 

 

 

U.S.

 

$

151

 

 

$

138

 

Non-U.S

 

 

—

 

 

 

—

 

Total current expense

 

$

151

 

 

$

138

 

 

Reconciliations of the differences between the expense for income taxes and income taxes at the statutory U.S. federal income tax rate is as follows (dollars in thousands):

 

 

 

2024

 

 

2023

 

 

 

Amount

 

 

Percent of Pretax Income

 

 

Amount

 

 

Percent of Pretax Income

 

Income taxes from continuing operations at statutory rate

 

$

(4,439

)

 

 

21.0

%

 

$

14,108

 

 

 

(21.0

)%

State income taxes

 

 

(85

)

 

 

0.4

%

 

 

406

 

 

 

(0.6

)%

State effect of permanent items

 

 

(46

)

 

 

0.2

%

 

 

33

 

 

 

—

 

Permanent stock-based compensation

 

 

91

 

 

 

(0.4

)%

 

 

(26

)

 

 

—

 

Deferred rate change

 

 

104

 

 

 

(0.5

)%

 

 

1,839

 

 

 

(2.7

)%

Warrants issuance

 

 

(2,942

)

 

 

13.9

%

 

 

697

 

 

 

(1.0

)%

Expiring NOLs and credits

 

 

(5,177

)

 

 

24.5

%

 

 

26,355

 

 

 

(39.2

)%

Milestone deferral true-up

 

 

4,285

 

 

 

(20.3

)%

 

 

—

 

 

 

—

 

Convertible debt amortization

 

 

538

 

 

 

(2.6

)%

 

 

388

 

 

 

(0.6

)%

Deferred stock-based compensation true-up

 

 

884

 

 

 

(4.2

)%

 

 

—

 

 

 

—

 

Other

 

 

227

 

 

 

(1.1

)%

 

 

2

 

 

 

—

 

R&D credit

 

 

(1,235

)

 

 

5.8

%

 

 

(750

)

 

 

1.1

%

Increase in valuation allowance

 

 

7,946

 

 

 

(37.6

)%

 

 

(42,914

)

 

 

63.9

%

Total income tax expense

 

$

151

 

 

 

(0.7

)%

 

$

138

 

 

 

(0.1

)%

 

The components of deferred tax assets and liabilities as of December 31, 2024 and 2023 are as follows (in thousands):

 

 

 

December 31,

 

 

 

2024

 

 

2023

 

Noncurrent deferred tax assets (liabilities)

 

 

 

 

 

 

Accrued expenses

 

$

53

 

 

$

75

 

Stock-based compensation

 

 

2,238

 

 

 

2,834

 

Lease liability

 

 

553

 

 

 

631

 

Other

 

 

(2,300

)

 

 

(798

)

Capitalized Sec. 174 R&E

 

 

13,202

 

 

 

10,405

 

Net operating loss carryforwards

 

 

48,684

 

 

 

46,437

 

Research and development credits

 

 

6,145

 

 

 

1,044

 

     Total deferred tax assets

 

 

68,575

 

 

 

60,628

 

Valuation allowances

 

 

(68,575

)

 

 

(60,628

)

Net deferred tax assets

 

$

—

 

 

$

—

 

As of December 31, 2024 and 2023, the Company had available federal net operating loss (“NOL”) carryforwards of approximately $215.7 million and $205.7 million, respectively, and state and net operating loss carryforwards of approximately $122.0 million and $141.2 million, respectively. The Company’s state and net operating loss carryforwards began to expire in 2019. As of December 31, 2024, the Company had available federal research and development credit carryforwards of $5.6 million which began to expire in 2026. For the years ended December 31, 2024 and 2023, the Company paid $0.7 million and zero for U.S. federal and state income taxes, respectively.

We completed a Section 382 study of transactions in our stock through December 31, 2023 and concluded that we have experienced ownership changes since inception that we believe under Section 382 and 383 of the Code will result in limitations on our ability to use certain pre-ownership change NOLs and credits. In addition, we may experience subsequent ownership changes as a result of future equity offerings or other changes in the ownership of our stock, some of which are beyond our control. As a result, the amount of the NOLs and tax credit carryforwards presented in our consolidated financial statements are limited and the related amounts have been updated. Similar provisions of state tax law may also apply to limit the use of accumulated state tax attributes.

On December 22, 2017, the “Tax Cuts and Jobs Act” was signed into law. The tax reform has the following effects on the Company: (1) permanently reduces the maximum corporate income tax rate from 35% to 21% effective for tax years beginning after December 31, 2017, (2) allows temporary 100% expensing for certain business assets and property placed in service after September 27, 2018 and before January 1, 2023, (3) disallows NOL carrybacks but allows for the indefinite carryforward of those NOLs which applies to losses arising in tax years beginning after December 31, 2018 and, (4) limits NOL deductions for each year equal to the lesser of the available carryover or 80% of a taxpayer’s pre-NOL deduction taxable

income. This applies to losses arising in tax years ending on or after December 31, 2017. As of December 31, 2024 and 2023, the Company has concluded that it is more likely than not that the Company will not realize the benefit of its deferred tax assets due to its history of losses. Accordingly, the net deferred tax assets have been fully reserved.

All tax years remain open to examination by U.S. federal and state income tax authorities because the Company has incurred cumulative net operating losses since inception.

The Company applies ASC 740-10-25-5, Income Taxes, formerly FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, as amended, on January 1, 2009. The difference between the tax benefit recognized in the financial statements and the tax benefit claimed in the tax return is referred to as an unrecognized tax benefit.

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits as of December 31, 2024 and 2023 (in thousands):

 

 

 

December 31,

 

 

 

2024

 

 

2023

 

Unrecognized tax benefit—January 1

 

$

361

 

 

$

436

 

Additions for tax positions of current period

 

 

—

 

 

 

—

 

Additions for tax positions of prior periods

 

 

—

 

 

 

—

 

Deferred rate change

 

 

(3

)

 

 

(75

)

Unrecognized tax benefit—December 31

 

$

358

 

 

$

361

 

 

None of the unrecognized tax benefits would, if recognized, affect the effective tax rate because the Company has recorded a valuation allowance to fully offset federal and state deferred tax assets. The Company has no tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the coming year. The Company has $0 provided for interest and penalties associated with uncertain tax positions.