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INCOME TAXES
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The components of income tax expense (benefit) were as follows for the years ended December 31, 2024 and December 31, 2023, respectively (in thousands):
YEAR ENDED DECEMBER 31,
20242023
Current expense:
State$2 $3 
Total current expense$2 $3 
The provision for the years ended December 31, 2024 and December 31, 2023 was related to state income taxes.
A reconciliation of income tax expense to the amount computed by applying the statutory federal income tax rate to the loss from operations is summarized for the years ended December 31, 2024 and December 31, 2023 as follows (in thousands):
YEAR ENDED DECEMBER 31,
20242023
Expected income tax expense (benefit) at federal statutory rate
$354,390 $(50,684)
State income tax expense (benefit), net of federal benefit10,106 (3,568)
Permanent items6,842 1,524 
R&D credits(28,602)(2,322)
Unrecognized tax benefits (FIN 48)(4,651)1,054 
Elimination of deferred tax assets and liabilities upon Transaction with Acquirer
195,694 — 
Non-taxable gain related to Transaction with Acquirer
(410,226)— 
336(e) election
665 — 
Return to provision true-ups— (420)
Valuation allowance(124,216)54,419 
Income tax expense$2 $3 
Income taxes are accounted for under the asset and liability method. Deferred income taxes are recorded for temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities. Deferred tax assets and liabilities reflect the tax rates expected to be in effect for the years in which the differences are expected to reverse. A valuation allowance is provided if it is more likely than not that some or all of the deferred tax assets will not be realized.
The components of net deferred income taxes were as follows (in thousands):
AS OF DECEMBER 31,
 20242023
Deferred income tax assets 
Net operating loss carryforward$4,726 $68,254 
Research and development credits— 12,648 
Intangibles56 3,289 
Accruals893 1,412 
Stock compensation809 8,581 
Capitalized research and development costs15,718 51,772 
Operating lease liabilities1,776 697 
Other5 10 
Gross deferred tax assets23,983 146,663 
Less: Valuation allowance(21,789)(146,005)
Total deferred tax assets2,194 658 
Deferred income tax liabilities 
Fixed assets(575)(10)
Operating lease right-of-use assets(1,619)(648)
Total deferred tax liabilities(2,194)(658)
Net deferred tax assets (liabilities)$— $— 
In connection with the Separation, the Former Parent retained all rights associated with the unused federal and state NOLs and research tax credit carryforwards as of the date of the transaction to offset its future taxable income. As of December 31, 2024, the Company had unused federal and state NOL carryforwards of approximately $20.3 million and $7.8 million, respectively. The federal NOL carryforwards may be carried forward indefinitely but are only available to offset up to 80% of pre-NOL taxable income each year. The state NOL carryforwards will begin to expire in 2044 if not utilized.
The utilization of NOL carryforwards to offset future taxable income may be subject to an annual limitation as a result of ownership changes that have occurred previously or may occur in the future. Under Sections 382 and 383 of the IRC, a corporation that undergoes an “ownership change” may be subject to limitations on its ability to utilize its pre-change NOLs and other tax attributes otherwise available to offset future taxable income and/or tax liability. An ownership change is defined as a cumulative change of 50 percentage points or more in the ownership positions of certain stockholders or groups of stockholders during a rolling three-year period. Following the Separation, the Company has not completed a formal study to determine if any ownership changes within the meaning of IRC Section 382 and 383 have occurred. It is possible that the Company may incur ownership changes in the future. If an ownership change has occurred, the Company’s ability to use its NOL carryforwards may be restricted, which could require the Company to pay federal or state income taxes earlier than would be required if such limitations were not in effect.
The Company has established a full valuation allowance against its deferred tax assets due to uncertainties that preclude it from determining that it is more likely than not that the Company will be able to generate sufficient taxable income to realize such assets. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2024. Such objective evidence limits the ability to consider other subjective evidence such as the Company’s projections for future growth. Based on this evaluation, as of December 31, 2024, a valuation allowance of $21.8 million has been recorded in order to measure only the portion of the deferred tax asset that more likely than not will be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence, such as estimates of future taxable income during carryforward periods and the Company’s projections for growth.
The Company recognizes liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. While the Company believes that it has appropriate support for the positions taken on its tax returns, the Company regularly assesses the potential outcome of examinations by tax authorities in determining the adequacy of its provision for income taxes.
The following table summarizes the activity related to the Company’s unrecognized tax benefits (in thousands):
AS OF DECEMBER 31,
 20242023
Beginning balance$4,651 $3,597 
Increases (decreases) related to current year tax positions
(4,651)1,054 
Ending balance$— $4,651 
As of December 31, 2024, the Company did not have any gross unrecognized tax benefits. The Company does not expect any significant increases or decreases to its unrecognized tax benefits within the next 12 months. The Company’s policy is to recognize the interest expense and/or penalties related to income tax matters as a component of income tax expense. The Company had no accrual for interest or penalties on its consolidated balance sheets as of December 31, 2024 or December 31, 2023, and has not recognized interest and/or penalties in its consolidated
statements of operations for the years ended December 31, 2024 and December 31, 2023 as the unrecognized tax benefits relate to tax positions for which no cash tax liability has been reduced.
The Company is subject to income taxes in the United States and various state jurisdictions. Following the Separation, the Company’s tax years from 2024 and forward are subject to examination by the United States and state tax authorities. The Company has not been, nor is it currently, under examination by the U.S. federal or any state tax authority.