Income Taxes

12 Months Ended

Dec. 31, 2023

Income Taxes

15. INCOME TAXES

The current and deferred components of the provision for income taxes for federal, state and foreign jurisdictions for the years ended December 31, 2023 and 2022 are as follows (in thousands):

	Year Ended December 31,
	2023		2022
Current:
Federal	$	—	$	—
State		—		—
Foreign		48		—
Total current tax expense (benefit)	$	48	$	—
Deferred:
Federal		—		—
State		—		—
Foreign		—		—
Total deferred tax expense (benefit)	$	—	$	—
Total tax expense (benefit)	$	48	$	—

The Company’s provision for income taxes differs from the amount determined by applying the applicable federal statutory tax rate to the loss before income taxes due to the valuation allowance for the net deferred income tax assets. A reconciliation of the U.S. statutory tax rate to our effective tax rate is presented below:

	Year Ended December 31,
	2023			2022
U.S. federal statutory income tax rate		21.0	%		21.0	%
State and local income taxes		4.5	%		7.4	%
R&D tax credits		3.1	%		5.9	%
Stock-based compensation		2.6	%		(5.1	)%
Warrant expense		(2.5	)%		13.0	%
Change in tax rates		(0.4	)%		0.4	%
Provision to return and deferred tax adjustments		(0.2	)%		10.9	%
Valuation allowance		(28.0	)%		(53.4	)%
Other		(0.1	)%		(0.1	)%
Effective tax rate		0.0	%		0.0	%

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):

	December 31,			December 31,
	2023			2022
Deferred tax assets:
Accrued bonus	$	3,652		$	1,018
Unearned revenue		1,233			—
Stock-based compensation		7,308			2,965
Depreciation and amortization		2,843			2,725
Capitalized R&D costs		27,432			8,262
Lease liabilities		2,031			1,068
R&D credit carryforwards		11,428			6,240
Net operating loss carryforwards		36,197			24,836
Other		686			2,256
Total deferred tax assets	$	92,810		$	49,370
Valuation allowance		(90,963	)		(48,212	)
Total deferred tax assets, net of valuation allowance	$	1,847		$	1,158
Deferred tax liabilities:
Right of use assets		(1,142	)		(989	)
Other		(705	)		(169	)
Total deferred tax liabilities	$	(1,847	)	$	(1,158	)
Net deferred tax assets (liabilities)	$	—		$	—

The following table summarizes the activity in the Company’s valuation allowance against its gross deferred tax assets (in thousands):

	2023			2022
Beginning balance	$	48,212		$	20,388
Charged to costs and expenses		44,123			25,925
Charged (credited) to other accounts		(1,372	)		1,899
Ending balance	$	90,963		$	48,212

The Company had pre-tax U.S. federal and state net operating loss carryforwards of approximately $143.4 million and $95.7 million, respectively, as of December 31, 2023. The Company’s net operating loss carryforwards generated prior to January 1, 2018 of $1.1 million will begin to expire, if not utilized, in 2036. The Company’s net operating loss carry forwards generated after December 31, 2017, will carryforward indefinitely. As of December 31, 2023, the Company had U.S. federal and state tax credit carryforwards of $11.6 million. The tax credit carryforwards will expire between 2025 and 2043.

The deductibility of such credits and net operating losses (“NOL”) may be limited. Under Sections 383 and 382 of the Internal Revenue Code of 1986, as amended (the “Code”), and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which generally occurs if the percentage of the corporation’s stock owned by 5% stockholders increases by more than 50% over a three-year period, the corporation’s ability to use its pre-change credits and NOL carryforwards and other pre-change tax attributes to offset its post-change income, may be limited. The Company has not determined if it has experienced Section 383/382 ownership changes in the past and if a portion of its NOL and tax credit carryforwards are subject to an annual limitation. In addition, the Company may experience ownership changes in the future as a result of subsequent shifts in its stock ownership, some of which may be outside of its control. If the Company determines that an ownership change has occurred and its ability to use its historical NOL and tax credit carryforwards is significantly limited, it would harm the Company’s future operating results by effectively increasing its future tax obligations.

The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. Based on the Company’s history of operating losses, including a three-year cumulative loss position as of December 31, 2023 and 2022, the Company has concluded that it is not more likely than not that its deferred income tax assets will be realized. Accordingly, the Company has provided a full valuation allowance, for each of the years ended December 31, 2023 and 2022. The net increase in the valuation allowance of $42.8 million is due to the impacts of capitalized research and development and current year operating losses.

The Company is generally subject to a three-year statute of limitations by major tax jurisdictions. The current tax years that are subject for examination are tax years 2018 through 2022, although tax years dating back to 2016 remain open up to the tax attribute amounts carried forward for future use.