Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

9. Income Taxes

The following is a reconciliation between the provision for income taxes and income taxes computed using the U.S. federal statutory corporate tax rate for the years ended December 31, 2023 and 2022 is as follows (in thousands):

	Year Ended December 31,
	2023			2022
Expected tax benefit at statutory rate	$	(14,518	)	$	(11,618	)
State income tax, net of federal benefit		(67	)		(58	)
Officers compensation		389			598
Permanent items and other		1			(120	)
Stock Compensation		(375	)		827
Research credits		(3,345	)		(2,093	)
Change in valuation allowance		17,915			12,466
Provision for income taxes	$	—		$	2

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2023 and 2022 are as follows (in thousands):

	As of December 31,
	2023			2022
Deferred tax assets:
Net operating loss carryforwards	$	14,126		$	11,596
Capitalized research and development		16,906			7,097
Tax credits		6,412			2,958
Stock compensation		2,871			1,016
Other, net		2,248			1,090
Total deferred tax assets		42,563			23,757
Valuation allowance		(40,920	)		(23,085	)
Deferred tax assets, net of valuation allowance		1,643			672
Deferred tax liabilities:
Depreciation		(266	)		(151	)
Right of use assets		(1,377	)		(521	)
Total deferred tax liabilities		(1,643	)		(672	)
Net deferred tax assets / (liabilities)	$	—		$	—

The Company has established a valuation allowance against its net deferred tax assets due to the uncertainty surrounding the realization of such assets. The Company periodically evaluates the recoverability of the deferred tax assets. At such time as it is determined that it is more likely than not that deferred assets are realizable, the valuation allowance will be reduced. The Company has recorded a full valuation allowance of $40.9 million as of December 31, 2023 as management cannot conclude that it is more likely than not that certain deferred tax assets will be realized primarily due to the history of losses from inception. The Company increased its valuation allowance by approximately $17.8 million during the year ended December 31, 2023.

At December 31, 2023, the Company had federal and state tax loss carry forwards of approximately $58.0 million and $44.1 million, respectively. As a result of the Tax Cuts and Jobs Act of 2017, for U.S. income tax purposes, net operating losses generated after December 31, 2017 can be carried forward indefinitely, but are limited to 80% utilization against future taxable income each year. Of the amount of federal and state net operating loss carryforwards, $45.9 million and $1.2 million, respectively, can be carried forward indefinitely. Unless previously utilized, certain state net operating losses will begin to expire in 2038.

In accordance with the 2017 Tax Cuts and Jobs Act, research and experimental (R&E) expenses under Internal Revenue Code (IRC) Section 174 are required to be capitalized beginning in 2022. R&E expenses are required to be amortized over a period of five years for domestic expenses and 15 years for foreign expenses. The Company has capitalized R&E expenses in its current tax provision pursuant to the IRC Section 174.

At December 31, 2023, the Company has federal and California research and development tax credits of $6.4 million and $2.0 million, respectively. The federal research and development tax credits begin to expire in 2038 unless previously utilized. The California research and development tax credits carry forward indefinitely.

Pursuant to the 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.

Uncertain tax positions are evaluated based upon the facts and circumstances that exist at each reporting period. Subsequent changes in judgment based upon new information may lead to changes in recognition, derecognition, and measurement. Adjustment may result, for example, upon resolution of an issue with the taxing authorities or expiration of a statute of limitations barring an assessment for an issue.

The Company recognizes a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained upon examination by tax authorities.

The following table summarizes the changes to the Company’s gross unrecognized tax benefits for the years ended December 31, 2023 and 2022, respectively (in thousands):

	Year Ended December 31,
	2023		2022
Beginning balance at January 1	$	1,574	$	1,142
Additions related to current year positions		605		366
Additions related to prior year positions		827		66
Ending balance at December 31	$	3,006	$	1,574

Due to the existence of the valuation allowance, future recognition of previously unrecognized tax benefits will not impact the Company’s effective tax rate. The Company is subject to taxation in the United States and various state jurisdictions. All of the Company’s tax years from inception are subject to examination by federal and state tax authorities. The Company’s practice is to recognize interest and penalties related to income tax matters in income tax expense.

The Company had no accrued interest or penalties related to income tax matters in the Company’s balance sheet as of December 31, 2023 and has not recognized interest or penalties in the Company’s statements of operations and comprehensive loss for the years ended December 31, 2023 and 2022. Further, the Company is not currently under examination by any federal, state or local tax authority.