Income Taxes

12 Months Ended

Dec. 31, 2023

Income Taxes [Abstract]

Income taxes

Note 8-Income taxes

The table below presents the components of the provision for taxes:

The Company’s provision is primarily driven by the full valuation allowance in 2023 and 2022.

	As of December 31,
	2023		2022
Current
U.S. Federal	$	-	$	-
U.S. State		-		-
U.S. Foreign		-		-
Total current provision
Deferred		-		-
U.S. Federal		-		-
U.S. State		-		-
U.S. Foreign		-		-
Total deferred benefit				-
Change in valuation allowance		-		-
Total provision for income taxes	$	-	$	-

At December 31, 2023 and 2022, the tax effects of the temporary differences and carryforwards that give rise to deferred tax assets consist of the following:

	As of December 31,
	2023			2022
Deferred tax assets
Net operating loss carryforwards	$	11,926,158		$	10,378,471
Research and development credits		-			-
Capitalized research costs		2,272,029			1,211,477
Equity based compensation		549,587			670,035
Licenses acquired		266,091			338,239
Depreciation		-			-
Accruals and other temporary differences		297,949			215,152
Total deferred tax assets		15,311,814			12,813,374
Less valuation allowance		(15,311,814	)		(12,813,374	)
Deferred tax assets, net of allowance	$	-		$	-

A reconciliation of the statutory income tax rates and the Company’s effective tax rate for the years ended December 31, 2023 and 2022 is as follows:

	Years Ended December 31,
	2023			2022
Statutory federal income tax rate		21.0	%		21.0	%
State taxes, net of federal benefit		10.3	%		9.5	%
Impact of non-U.S. earnings		0.0	%		0.0	%
Permanent items		0.0	%		(0.9	)%
Credits		0.8	%		0.0	%
Equity compensation		0.0	%		(0.1	)%
Rate changes		0.0	%		0.0	%
Foreign rate differential		0.1	%		0.0	%
Previous tax year adjustment		(0.2	)%		10.0	%
Other		0.0	%		0.0	%
Change in valuation allowance		(32.0	)%		(39.6	)%
Total		0.0	%		0.0	%

The Company has determined, based upon available evidence, that it is more likely than not that the net deferred tax assets will not be realized and, accordingly, has provided a full valuation allowance against its net deferred tax assets.

As of December 31, 2023 and December 31, 2022, the Company has Federal net operating loss carryforwards of approximately $37.7 million and $32.9 million available to reduce future taxable income, if any, for Federal tax purposes. Approximately $1.5 million of Federal net operating losses can be carried forward to future tax years and expire in 2037. The Federal net operating loss generated during the years ended after December 31, 2017 of approximately $36.0 million can be carried forward indefinitely; however, the deduction for net operating losses incurred in tax years beginning after January 1, 2018 is limited to 80% of annual taxable income. In addition, the Company had approximately $0.5 million and $0.3 million of net operating losses at its subsidiary located in Australia, as of December 31, 2023 and December 31, 2022, respectively.

As required by the 2017 Tax Cuts and Jobs Act and effective in 2022, the deferred tax asset as of December 31, 2023 and December 31, 20222, included $2.3 million and $1.2 million related to the mandatory capitalization of research and development expenses.

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law. The IRA increased and modified the qualified small business (“QSB”) payroll tax credit for increasing research activities. Provision 13902 of the IRA of 2022 increased the maximum amount of payroll tax research credit that a QSB can elect to apply against payroll tax liability from $250,000 to $500,000 for tax years beginning after December 31, 2022. This payroll tax credit is a creditable tax credit against the employer’s portion of social security taxes, and the IRA also modified IRC 3111(f) to allow a portion of the payroll tax credit to apply against the employer’s portion of Medicare tax. For the year ended December 31, 2023, the Company recorded $0.1 million of other income for the payroll tax credit and $0.2 million is still outstanding. The remaining research credit carryforward of $0.2 million will be utilized in the future as an offset against payroll taxes at the time the payroll tax is incurred.

The utilization of the Company’s net operating loss carryforwards and research tax credit carryovers could be subject to annual limitations under Section 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), 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 net operating loss 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 of the Code, 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 not conducted an analysis of an ownership change under Section 382 of the Code. To the extent that a study is completed and an ownership change is deemed to occur, the Company’s net operating losses and tax credits could be limited.

At December 31, 2023 and 2022, the Company did not have any significant uncertain tax positions. The Company will recognize interest and penalties related to uncertain tax positions, as applicable, in income tax expense. As of December 31, 2023 and 2022, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s statements of operations. The Company does not anticipate a material change to unrecognized tax benefits in the next twelve months.

All of the Company’s tax years will remain open for examination by the Federal and state tax authorities from the date of utilization of the net operating loss.

Management asserts that its foreign earnings are permanently reinvested, and therefore, have not provided deferred taxes on foreign cash. Additionally, no additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the transition tax, or any additional outside basis differences inherent in our foreign subsidiaries, as these amounts continue to be indefinitely reinvested in foreign operations. The company will continue to monitor the foreign cash position as they maintain the assertion that foreign earnings are permanently reinvested.