Company: SION
Filing Date: 2025-02-03
Form Type: S-1/A
Source: 0001193125-25-018825
Chunk: 349

Company: Sionna Therapeutics, Inc.
Filing Date: 2025-02-03
Form: S-1/A
Chunk 349
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 $47.1 million and
$34.3 million as of December 31, 2023 and 2022, respectively, which will expire at various dates through 2043.

As of December 31,
2023 and 2022, the Company had federal research and development tax credit (“Federal R&D Tax Credit”) carryforwards of $1.5 million and $0.8 million, respectively, available to reduce future tax liabilities, which will expire
at various dates through 2043.

As of December 31, 2023 and 2022, the Company had state research and development credit (“State R&D
Tax Credit”) carryforwards of approximately $1.4 million and $0.8 million, respectively, available to reduce future tax liabilities, which will expire at various dates through 2038.

The Company has evaluated the positive and negative evidence bearing upon its ability to realize its deferred tax assets, which are comprised primarily
of net operating loss carryforwards, the capitalization of research and experimental expenditures, and tax credits. Management has considered the Company’s history of cumulative net losses in the United States, estimated future taxable income
and prudent and feasible tax planning strategies and has concluded that it is more likely than not that the Company will not realize the benefits of its U.S. federal and state deferred tax assets. Accordingly, a full valuation allowance of
$34.3 million and $20.1 million has been established against these net deferred tax assets as of December 31, 2023 and 2022, respectively. The Company reevaluates the positive and negative evidence at each reporting period. The
Company’s valuation allowance increased during 2023 by approximately $14.2 million, primarily due to the capitalization of research and experimental expenditures and the increase in net operating loss and tax credit carryforwards.

Under the provision of the Internal Revenue Code, the net operating loss and tax credit carryforwards are subject to review and possible adjustment by
the Internal Revenue Service and state tax authorities. Net operating loss and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative change in the ownership interest of significant shareholders over a
three-year period in excess of 50%, as defined under Section 382 and 383 of the Internal Revenue Code, respectively, as well as similar state provisions. This could limit the amount of tax attributes that can be utilized annually to offset
future taxable income or tax liabilities. The amount of the annual limitation is