Annual report [Section 13 and 15(d), not S-K Item 405]

Income Taxes

v3.25.1
Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of loss before provision for income taxes for the years ended December 31, 2024 and 2023, are as follows (in thousands):
December 31,
2024		 December 31,
2023
Domestic pre-tax income (loss)
 $ (25,946) $ (28,984)
Foreign pre-tax income (loss)
 —  — 
Total pre-tax income (loss)
 $ (25,946) $ (28,984)
For the years ended December 31, 2024 and 2023, the Company did not record a provision for income taxes due to the recognition of a full valuation allowance.
The Company recognizes federal and state deferred tax assets or liabilities based on the Company's estimate of future tax effects attributable to temporary differences and carryovers. The Company records a valuation allowance to reduce any deferred tax assets by the amount of any tax benefits that, based on available evidence and judgment, are not expected to be realized. In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. The
Company considers projected future taxable income and planning strategies in making this assessment. As of December 31, 2024, as a result of a three-year cumulative loss and lack of sufficient positive evidence, management concluded that a full valuation allowance was necessary to offset our deferred tax assets. The Company intends to maintain a valuation allowance until sufficient positive evidence exists to support its reversal. The Company will continue to evaluate its deferred tax balances to determine any assets that are more likely than not to be realized. During the year ended December 31, 2024, the valuation allowance decreased by $4.5 million, primarily due to the Section 382 net operating loss ("NOL") carryforwards. During the year ended December 31, 2023, the valuation allowance increased by $6.4 million, primarily due to the increase in NOL carryforwards.
At December 31, 2024 and 2023, the tax effects of the temporary differences and carryovers that give rise to deferred tax assets consisted of the following (in thousands):
  December 31,
2024		 December 31,
2023
Deferred tax assets:
NOL carryforwards
 $ 9,281  $ 14,539 
Stock-based compensation
 1,908  729 
Amortization of intangible assets
 69  227 
Lease liability 378  392 
Capitalized research costs 1,460  968 
Accruals and other temporary differences —  168 
Gross deferred tax assets
 13,096  17,023 
Deferred tax liabilities:
Depreciation (480) (105)
Right-of-use asset
 (418) (386)
Accruals and other temporary differences (196) — 
Gross deferred tax liabilities
 (1,094) (491)
Net deferred taxes before valuation allowance
 12,002  16,532 
Less: valuation allowance
 (12,002) (16,532)
Net deferred tax assets
 $ —  $ — 
As of December 31, 2024, the Company has NOL carryforwards of approximately $27.3 million and $68.1 million available to reduce future taxable income, if any, for federal and state income tax purposes, respectively. Approximately $1 thousand of federal NOLs can be carried forward to future years and expire in 2037. The federal NOL generated during the years ended after December 31, 2017, of approximately $27.3 million can be carried forward indefinitely but is limited to offsetting only 80% of taxable income each year.
The utilization of our NOL carryforwards and research tax credit carryovers could be subject to annual limitations under Section 382 and 383 of the Internal Revenue Code of 1986, and similar state tax provisions, due to ownership change limitations that may have occurred previously or that could occur in the future. These ownership changes limit the amount of NOL carryforwards and other deferred tax assets that can be utilized to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382 and 383, results from transactions increasing ownership of certain stockholders or public groups in the stock of the corporation by more than 50 percent points over a three-year period. The Company has conducted an analysis of an ownership change under section 382 and concluded that the Company's NOL and tax credits will be limited.
A reconciliation of the statutory income tax rates and the Company’s effective tax rate for the years ended December 31, 2024 and December 31, 2023 are as follows (in thousands):
Year ended
December 31,
2024		 Year ended
December 31,
2023
Tax provision at statutory rate $ (5,448) 21.0  % $ (6,086) 21.0  %
State taxes, net of federal benefit (665) 2.6  % (492) 1.7  %
Permanent items 932  (3.6) % 265  (0.9) %
Deferred tax true-up / return to provision 131  (0.5) % (74) 0.3  %
State NOL true-up adjustments
(918) 3.5  % —  —  %
Section 382 limitations
 10,522  (40.6) % —  —  %
Other (22) 0.1  % —  —  %
Increase/(decrease) in valuation reserve (4,532) 17.5  % 6,387  (22.1) %
Income taxes provision (benefit) $ —  —  % $ —  —  %
On December 31, 2024 and 2023, the Company did not have any significant uncertain tax positions. The Company will recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2024 and 2023, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s consolidated statements of operations and comprehensive loss. The Company does not anticipate a material change to unrecognized tax benefits in the next twelve months.
The Company’s tax years from 2021 forward remain open for examination by the federal and state taxing authorities. In addition, to the extent that the Company’s tax attributes are utilized in future years to offset income or income taxes, those years which generated the tax attributes are open since the Company’s inception. The Company is not aware of any examinations that are currently taking place by taxing authorities.