Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

12.Income Taxes

The provision for income taxes differs from the amount which would result by applying the federal statutory income tax rate to pre-tax loss for the years ended December 31, 2023 and 2022.

A reconciliation of the provision computed at the federal statutory rate to the provision for income taxes included in the accompanying statements of operations for the Company is as follows.

	For the Years Ended
	December 31, 2023			December 31, 2022
Income tax provision at statutory rate		21	%		21	%
State income taxes, net of federal benefit		(15	)%		7	%
Research and development credits		(1	)%		1	%
Change in valuation allowance		(5	)%		(29	)%
Effective income tax rate		—	%		—	%

For the years ended December 31, 2023 and 2022, the Company’s effective tax rate is below the federal statutory income tax rate of 21% primarily due to state income taxes, net of federal benefit and the Company’s position to establish a full valuation allowance on its deferred tax assets.

The tax effects of temporary differences and carryforwards that give rise to significant portions of the net deferred tax assets are presented below (in thousands):

	For the Years Ended
	December 31, 2023			December 31, 2022
Deferred tax assets:
Net operating loss carryforwards	$	6,759		$	6,536
Research and development credits		186			231
Research and development costs		465			292
Lease liability		103			145
Other temporary differences		158			159
Total deferred tax assets		7,671			7,363
Valuation allowance		(7,574	)		(7,220	)
Deferred tax assets recognized		97			143
Deferred tax liabilities:
Right-of-use assets		(97	)		(143	)
Total deferred tax liabilities		(97	)		(143	)
Net deferred tax assets	$	—		$	—

The Company has recorded a valuation allowance for its deferred tax assets that it does not believe will be realizable at a more likely than not level based on analysis of all available sources of taxable income. The valuation allowance increased by $354 thousand and $2.9 million for the years ended December 31, 2023 and 2022, respectively, due to current and previous year losses and credits claimed.

At December 31, 2023 and 2022, the Company had federal net operating loss carryforwards of approximately $30.4 million and $23.3 million, respectively, which will begin to expire in 2036. Approximately $29.9 million of federal net operating losses can be carried forward indefinitely. At December 31, 2023 and 2022, the Company had state net operating loss carryforwards for California of approximately $5.1 million and $23.2 million, respectively, which will begin to expire in 2031. The Company also had federal and state research and development credit carryforwards of approximately $31 thousand and $296 thousand, respectively, at December 31, 2023. The federal credits start to expire in 2043. The California credits carryforward indefinitely.

Federal and state tax laws impose substantial restrictions on the utilization of net operating loss and credit carryforwards in the event of an “ownership change” for tax purposes, as defined in Section 382 of the Internal Revenue code. Accordingly, the Company’s ability to utilize these carryforwards may be limited as a result of such ownership changes. Such a limitation could result in limitation in the use of net operating losses in future years and possibly a reduction of the net operating losses available. The Company has not performed a 382 study to determine if any ownership changes have occurred which could potentially limit the utilization of the tax attribute carryforwards.

A reconciliation of the beginning and ending amount of gross unrecognized tax positions is as follows (in thousands):

	For the Years Ended
	December 31, 2023			December 31, 2022
Unrecognized tax benefits, beginning of year	$	115		$	53
Additions related to current year tax positions		(17	)		62
Net deferred tax assets	$	98		$	115

During the year ended December 31, 2023 the amount of unrecognized tax benefits decreased by $17 thousand due to current year research and development credits generated during the year offset by a reduction in research and development credits available for use due to application of the Section 382 limitations. During the year ended December 31, 2022 the amount of unrecognized tax benefits increased by $62 thousand due to additional research and development credits generated during the year. As of December 31, 2023 and 2022, the total amount of unrecognized tax benefits was $98 thousand and $115 thousand, respectively. The reversal of the uncertain tax benefits would not affect the Company’s effective tax rate to the extent that it continues to maintain a full valuation allowance against its deferred tax assets.

The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes line item in the statements of operations. As of December 31, 2023, and 2022, the Company had not accrued any interest or penalties related to uncertain tax positions. The Company does not anticipate any material change in its unrecognized tax benefits over the next twelve months. The unrecognized tax benefits may change during the next year for items that arise in the ordinary course of business.

The Company files tax returns in U.S. Federal and state jurisdictions. The tax periods from 2016 to 2023 remain open to examination in all jurisdictions. In addition, any tax losses that were generated in prior years and carried forward may also be subject to examination by the respective authorities. The Company is not currently under examination by income tax authorities for federal or state purposes.