Income Taxes (Tables)

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Schedule of Effective Income Tax Rate Reconciliation

A reconciliation of the federal statutory income tax rate to the Company’s effective tax rate is as follows (in thousands):

	Years Ended December 31,
	2023			2022
Tax computed at federal statutory rate	$	(11,416	)	$	(7,283	)
State income taxes, net of federal benefit		(22	)		(21	)
Officers Compensation (Sec 162(m))		745			195
Equity compensation		749			290
Research and development credits		(1,179	)		(624	)
Other		(88	)		257
Valuation allowance		11,211			7,186
Provision for income taxes	$	—		$	—

Schedule of Deferred Tax Assets And Liabilities

Significant components of the Company’s net deferred tax assets were as follows (in thousands):

	Years Ended December 31,
	2023			2022
Deferred tax assets:
Net operating losses	$	16,127		$	8,252
Research and development credits		4,143			2,964
Intangible assets		7,322			3,746
Equity compensation		1,498			2,279
Contract liability		—			661
Other		66			104
Total deferred tax assets		29,156			18,006
Deferred tax liabilities:
ROU asset		(53	)		(94	)
Other		(59	)		(155	)
Total deferred liabilities		(112	)		(249	)
Gross deferred tax assets		29,044			17,757
Valuation allowance		(29,044	)		(17,757	)
Net deferred tax assets	$	—		$	—

The Company has established a valuation allowance against net deferred tax assets due to the uncertainty that such assets will be realized. The Company periodically evaluates the recoverability of the deferred assets. At such time as it is determined that it is more likely than not that the deferred tax asset will be realized, the valuation allowance will be reduced. The change in the valuation allowance for the year ended December 31, 2023 was an increase of $11.3 million.

At December 31, 2023, the Company had federal and state net operating loss carryforwards (NOL) of $76.2 million and $2.5 million, respectively. Federal NOL carryforwards of $76.2 million, generated after 2017, may be carried forward indefinitely but can only be utilized to offset 80% of future taxable income. The state NOL carryforwards begin expiring in 2036. State NOLs totaling $2.0 million may be carried forward indefinitely. In addition, the Company also has federal and California research and development credit carryforwards totaling $3.8 million and $0.4 million, respectively. The federal research and development credit carryforwards will begin to expire in 2035 unless previously utilized. The California research credits do not expire. The NOL and credit carryovers noted above do not include the pre-Merger amounts attributable to Silverback as noted in the IRC Section 382 disclosure in the paragraph below.

Pursuant to Internal Revenue Code (IRC) Sections 382 and 383, annual use of the company's NOL and research and development credit carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period. The Company has not completed an ownership change analysis pursuant to IRC Section 382. If ownership changes have occurred or occurs in the future, the amount of remaining tax attribute carryforwards available to offset taxable income and income tax expense in future years may be restricted or eliminated. If eliminated, the related asset would be removed from deferred tax assets with a corresponding reduction in the valuation allowance. Due to the existence of the valuation allowance, limitations created by future ownership changes, if any, will not impact the Company’s effective tax rate.

Additionally, as part of the transaction with Silverback, certain deferred tax assets generated in the Silverback pre-Merger periods were acquired by the Company consisting of federal and state net operation loss carryovers, research tax credit carryovers, and other tax attributes. These deferred tax assets will be subject to limitations on future use under IRC Section 382 and some of the attributes may expire unused. The Company has not completed an analysis under IRC Section 382 to determine the amount of such tax attributes that will be available annually and how much, if any, of the tax attributes may expire unused. As a result, the Company has not included any of these deferred tax assets in its components of deferred tax asset in the table above. Once the analysis is complete, to the extent that such deferred tax assets are available for future utilization, such assets will be included in the deferred tax assets and will be fully offset by valuation allowance as of December 31, 2023.

The evaluation of uncertainty in a tax position is a two-step process. The first step involves recognition. The Company determines whether it is more likely than not that a tax position will be sustained upon tax examination, including resolution of any related appeals or litigation, based on only the technical merits of the position. The technical merits of a tax position are derived from both statutory and judicial authority (legislation and statutes, legislative intent, regulations, rulings, and case law) and their applicability to the facts and circumstances of the tax position. If a tax position does not meet the more-likely-than-not recognition threshold, the benefit of that position is not recognized in the financial statements. The second step is measurement. A tax position that meets the more-likely-than-not recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate resolution with a taxing authority.

Unrecognized Tax Benefits Activity

The following table summarizes the reconciliation of the unrecognized tax benefits activity during the years ended December 31, 2023 and 2022 (in thousands):

	Years Ended December 31,
	2023		2022
Unrecognized tax benefits - beginning	$	1,520	$	1,147
Gross increases – tax positions in prior period		951		—
Gross increase – current-period tax positions		475		373
Unrecognized tax benefits - ending	$	2,946	$	1,520

The unrecognized tax benefit amounts are reflected in the determination of the Company’s deferred tax assets. If recognized, none of these amounts would affect the Company’s effective tax rate, since it would be offset by an equal corresponding adjustment in the deferred tax asset valuation allowance. The Company does not foresee material changes to its liability for uncertain tax benefits within the next twelve months.

The Company files income tax returns in the United States, various states, and Ireland. Due to the Company’s losses incurred, the Company's income tax returns for all jurisdictions are subject to examination by tax authorities from inception. The Company’s policy is to recognize interest expense and penalties related to income tax matters as tax expense. As of December 31, 2023, there were no significant accruals for interest related to unrecognized tax benefits or tax penalties. The Company has not incurred any material interest or penalties as of the current reporting date with respect to income tax matters. The Company does not expect that there will be unrecognized tax benefits of a significant nature that will increase or decrease within 12 months of the reporting date.