INCOME TAXES

12 Months Ended

Dec. 31, 2024

Income Tax Disclosure [Abstract]

INCOME TAXES

13. INCOME TAXES

The Company recorded a current provision for income taxes of less than $0.1 million for each of the years ended December 31, 2024 and 2023. The Company has incurred net pre-tax losses in the United States only for all periods presented. The Company has not reflected any benefit of such net operating loss (“NOL”) carryforwards in the accompanying consolidated financial statements. The provision for income taxes differs from the amount expected by applying the federal statutory rate to the loss before taxes as follows:

	Year Ended December 31,
	2024		2023
Profit before tax at federal statutory rate	21.0	%	21.0	%
State tax benefit, net of federal benefit	0.6	%	0.6	%
Research and development credit carryovers	10.2	%	2.7	%
Stock-based compensation	(1.5)	%	(1.5)	%
Permanent differences	(0.0)	%	(0.0)	%
Return to provision true ups	2.0	%	0.6	%
Change in valuation allowance	(32.4)	%	(23.5)	%
Effective income tax rate	(0.1)	%	(0.1)	%

In assessing the realizability of the net deferred tax assets, the Company considers all relevant positive and negative evidence in determining whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The realization of the gross deferred tax assets is dependent on several factors, including the generation of sufficient taxable income prior to the expiration of the NOL carryforwards. The Company has recorded a valuation allowance against its deferred tax assets on December 31, 2024 and 2023 because the Company’s management believes that it is more likely than not that these assets will not be fully realized in the near future. The increase in the valuation allowance of approximately $14.4 million in the year ended December 31, 2024 primarily relates to the generation of NOLs and research and development credits, and the capitalization of research and development costs that will be amortized in the future.

The Tax Cuts and Jobs Act (TCJA) requires taxpayers to capitalize and amortize research and development costs under Section 174 effective for tax years beginning on or after January 1, 2022. As a result, the Company capitalized $25.2 million and $24.1 million of research and development costs for the years ended December 31, 2024 and 2023, respectively, that will be amortized for tax purposes over five years if performed in the U.S. and over 15 years if performed outside of the U.S.

As of December 31, 2024, the Company had federal NOL carryforwards of approximately $123.9 million, all of which can be carried forward indefinitely, and state NOL carryforwards of $8.6 million, which begin to expire in 2036. The Company also has federal tax credits of $10.8 million and state tax credits of $1.1 million which may be used to offset future tax liabilities and will begin to expire in 2035. NOL and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities.

Subsequent ownership changes may further affect the limitation in future years. The Company has not conducted a study to assess whether a change of ownership has occurred or whether there have been multiple changes of ownership since Inception due to the significant complexity and cost associated with such a study. If the Company has experienced a change of ownership, as defined by Section 382 and 383 of the Internal Revenue Code, at any time since inception, utilization of the NOL carryforwards or research and development tax credit carryforwards would be subject to the annual limitations under Section 382 and 383 of the Internal Revenue Code.

Net deferred tax asset (liability) in the accompanying consolidated balance sheets consists of the following (in thousands):

	December 31,
	2024		2023
Deferred tax assets and (liabilities)
Net operating losses	$	26,500	$	20,243
Research and development expenses		15,494		13,431
Research and development credit		11,636		5,869
Accrued expenses		612		564
Stock-based compensation		348		168
Other		155		148
Intangible assets		5,589		5,511
Gross deferred tax asset		60,334		45,934
Valuation allowance		(60,330)		(45,931)
Net deferred tax asset		4		3
Fixed assets		(4)		(3)
Deferred tax liabilities		(4)		(3)
Net deferred tax asset (liability)	$	—	$	—

The Company will recognize both accrued interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2024, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s consolidated statements of operations and comprehensive loss. Since the Company is in a loss carryforward position, the Company is generally subject to examination by the U.S. federal, state and local income tax authorities for all tax years in which a loss carryforward is available. As of December 31, 2024, all tax returns remain open.