Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.24.1
Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes

10. Income Taxes

The reconciliation of federal statutory income tax rate to the Company’s effective income tax rate is as follows:

 

 

 

Year Ended December 31,

 

 

 

2023

 

 

2022

 

Expected income tax benefit at the federal statutory rate

 

 

21.0

%

 

 

21.0

%

State and local taxes, net of federal benefit

 

 

7.6

 

 

 

7.9

 

Research and development credit, net

 

 

6.4

 

 

 

4.5

 

Non-deductible items and other

 

 

(0.5

)

 

 

(0.6

)

Change in state and local tax rate

 

 

(0.7

)

 

 

(7.4

)

Change in valuation allowance

 

 

(33.8

)

 

 

(25.4

)

Total

 

 

0.0

%

 

 

0.0

%

 

 

Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The principal components of the Company’s deferred tax assets and liabilities consisted of the following:

 

 

 

December 31,

 

 

 

2023

 

 

2022

 

Deferred tax assets:

 

 

 

 

 

 

Federal, state and local net operating loss carryforwards

 

$

34,534

 

 

$

28,880

 

Capitalized research and development costs

 

 

19,830

 

 

 

9,640

 

Research and development tax credits

 

 

10,192

 

 

 

5,859

 

Stock-based compensation deductions

 

 

6,066

 

 

 

3,840

 

License fee deductions

 

 

240

 

 

 

262

 

Operating lease liabilities

 

 

1,482

 

 

 

1,535

 

Accrued expenses

 

 

1,665

 

 

 

1,165

 

Gross deferred tax assets

 

 

74,009

 

 

 

51,181

 

Less: valuation allowance

 

 

(72,560

)

 

 

(49,689

)

Total deferred tax assets

 

 

1,449

 

 

 

1,492

 

Deferred tax liabilities:

 

 

 

 

 

 

Operating lease right-of-use assets

 

 

(1,449

)

 

 

(1,492

)

Net deferred tax assets

 

$

—

 

 

$

—

 

 

The Company increased its valuation allowance by $22,871 for the year ended December 31, 2023 in order to maintain a full valuation allowance against its deferred tax assets. Based on the Company’s history of losses, the Company recorded a full valuation allowance against its deferred tax assets as of December 31, 2023. The Company intends to maintain a valuation allowance until sufficient positive evidence exists to support a reversal of the allowance.

As of December 31, 2023, the Company had federal, state and local net operating loss carryforwards of $121,570, $131,901 and $82,957, respectively; $121,320 of the federal net operating losses do not expire, and the remaining $250 expire in 2037. The state net operating losses begin to expire in 2037. The local net operating losses began to expire in 2024. As of December 31, 2023, the Company had federal and state research and development tax credit carryforwards of $9,923 and $269, respectively, which begin to expire in 2038. Under the provisions of Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the IRC), these net operating losses, credit carryforwards and other tax attributes may be subject to limitation based on previous significant changes in ownership and upon future significant changes in ownership of the Company, as defined by the IRC.

The Company files income tax returns in the U.S. federal jurisdiction as well as in Pennsylvania and Philadelphia. The tax years 2022, 2021 and 2020 remain open to examination by the jurisdictions where the Company is subject to tax.

The Company evaluates tax positions for recognition using a more-likely-than-not recognition threshold, and those tax positions eligible for recognition are measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon the effective settlement with a taxing authority that has full knowledge of all relevant information. As of December 31, 2023, the Company had no unrecognized income tax benefits that would affect the Company’s effective tax rate if recognized.