Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

12. Income Taxes

No provision for income taxes was recorded for the years ended December 31, 2023 and 2022. The Company has incurred net operating losses only in the United States since its inception. The Company has not reflected any benefit of such net operating loss carryforwards in the financial statements.

A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate was as follows:

	Year Ended December 31,
	2023			2022
Federal statutory income tax rate ate		21.00	%		21.00	%
State taxes		1.01			1.10
Others		(0.06	)		(0.69	)
Research and development credits		1.00			1.11
Transaction costs		(1.01	)		—
Lease Modification		3.27			—
Interest expense		—			—
Stock-based compensation		(1.52	)		(0.97	)
Change in valuation allowance		(23.69	)		(21.55	)
Provision for taxes		0.00	%		0.00	%

Net deferred tax assets and liabilities consisted of the following (in thousands):

	Year Ended December 31,
	2023			2022
Deferred tax assets:
Net operating losses - non-current	$	30,820		$	15,940
Capitalized R&D		14,493			13,815
General business credit - non-current		7,201			5,699
Operating lease right-of-use assets		88			1,220
Lease termination costs		6,621			—
Stock based compensation		2,017			1,703
Accruals and reserves		295			735
Fixed assets		6,161			170
Other		3			3
Gross deferred tax assets		67,699			39,285
Valuation allowance		(67,626	)		(38,110	)
Net deferred tax assets		73			1,175
Fixed asset basis		—			—
Operating lease liabilities		(73	)		(1,175	)
Other		—			—
Gross deferred tax liabilities		(73	)		(1,175	)
Valuation allowance	$	—		$	—

Net operating losses and tax credit carryforwards were as follows as of December 31, 2023 (dollars in thousands):

	Year Ended December 31, 2023
	Amount		Expiration Years
Net operating losses, federal (starting from January 1, 2018)	$	146,450	Do Not Expire
Net operating losses, state		29	2039 - 2043
Tax credits, federal		6,395	2041 - 2043
Tax credits, state		4,716	Do Not Expire

Utilization of the net operating loss carryforwards and research credit carryforwards may be subject to an annual limitation due to the ownership percentage change limitations provided by the Internal Revenue Code, as amended, (“IRC”), and similar state provisions. Annual limitations may result in the expiration of the net operating losses and tax credit carryforwards before they are utilized. The Company did not perform an IRC Section 382 analysis and any previous ownership changes may result in a limitation that will reduce the total amount of net operating loss and tax credit carryforwards disclosed that can be utilized. Subsequent ownership changes may affect the limitation in future years.

During the years ended December 31, 2023 and 2022, the Company recorded a full valuation allowance on federal and state deferred balances since management does not forecast the Company to be in a profitable position in the near future. Changes in the valuation allowance for deferred tax assets during the years ended December 31, 2023 and 2022 related primarily to the increases in net operating loss carryforwards and research and development tax credit carryforwards and were as follows (in thousands):

	Year Ended December 31,
	2023		2022
Valuation allowance at the beginning of the year	$	38,110	$	16,332
Increases recorded to income tax provision		29,516		21,778
Valuation allowance at the end of the year	$	67,626	$	38,110

The Company’s U.S. federal and state income tax returns are generally subject to tax examinations for the tax years from inception through December 31, 2022. There are currently no pending income tax examinations. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service and state tax authorities to the extent utilized in a future period.

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

	Year Ended December 31,
	2022			2022
Balance at beginning of year	$	2,701		$	1,407
Additions based on tax positions related to current year		899			1,862
Reduction for prior period positions		(42	)		(568	)
Unrecognized tax benefit-December 31	$	3,558		$	2,701

The entire amount of the unrecognized tax benefits would not impact the Company’s effective tax rate if recognized. The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision. The Company has elected to include interest and penalties as a component of tax expense. During the years ended December 31, 2023 and 2022, the Company did not recognize accrued interest and penalties related to unrecognized tax benefits. The Company does not anticipate that the amount of existing unrecognized tax benefits will significantly increase or decrease during the next 12 months.