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Income Taxes
12 Months Ended
Dec. 31, 2023
Income Taxes  
Income Taxes

Note 9. Income Taxes

Loss before income tax expense for the years ended December 31, 2023 and 2022, respectively, consisted of the following: (in thousands)

Domestic and foreign income before provision for income tax

    

    

2023

    

2022

    

Domestic

$

(18,290)

$

(14,802)

Foreign

 

 

Total

$

(18,290)

$

(14,802)

The Company had no income tax expense due to operating losses incurred for the years ended December 31, 2023 and 2022.

As of December 31, 2023, the Company had Federal and State NOL carryforwards of approximately $22.2 million and 14.6 million , respectively.

The Federal NOL carryforwards do not expire but the State NOL carryforwards expire if not utilized prior to 2043.  The Company had Federal research and development tax credit carryforwards of approximately $29.0 thousand as of December 31, 2023, which expire at various dates through 2042.

As required by ASC 740, management of the Company has evaluated the evidence bearing upon the realizability of its deferred tax assets. Based on the weight of available evidence, both positive and negative, management has determined that it is more likely than not that the Company will not realize the benefits of these assets. Accordingly, the Company recorded a valuation allowance of $7.2 million at December 31, 2023. The valuation allowance increased by $2.4 million during the year ended December 31, 2023, primarily as a result of the increase in net operating loss carryforwards generated in the current year.

Utilization of the U.S. federal and state net operating loss and research and development credit carryforwards may be subject to a substantial annual limitation under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, due to ownership changes that have occurred previously or that could occur in the future.  These ownership changes may limit the amount of net operating loss and research and development credit carryforwards that can be utilized annually to offset future taxable income and tax liabilities, respectively.  The Company has not completed a study to assess whether a change of ownership has occurred, or whether there have been multiple ownership changes since its formation, due to the significant cost and complexity associated with such a study.  Any limitation may result in expiration of a portion of the net operating loss carryforwards or research and development credit carryforwards begore utilization.  Further, until a study is completed by the Company and any limitation is known, no amounts are being presented as an uncertain tax position.

The principal components of the Company’s deferred tax assets and liabilities consist of the following at December 31, 2023 and 2022 (in thousands)

    

For the years ended December 31,

Tax effected significant temporary differences

2023

    

2022

Net operating loss carryforwards

$

5,413

$

3,687

Research & development credits

 

29

 

29

Equity based compensation

474

667

Capitalized research

1,106

447

Accrued expenses

186

Total deferred tax assets

7,208

4,830

less valuation allowance

(7,208)

(4,830)

Net deferred tax asset

$

$

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

For the years ended December 31,

Rate Reconciliation

2023

2022

ooo

ooo

ooo

ooo

ooo

ooo

ooo

Income (loss) before taxes

$

(18,290)

$

(14,802)

Tax expense (benefit) at the statutory rate

(3,841)

21.00%

(3,108)

21.00%

State income taxes, net of federal benefit

(34)

0.20%

(737)

5.00%

Stock Compensation

800

(4.50)%

261

(1.80)%

Debt Conversion

392

(2.10)%

1,155

(7.80)%

Permanent differences

39

(0.20)%

105

(0.70)%

Non-deductible executive compensation

75

(0.40)%

0.00%

Difference and changes in tax rates

207

(1.10)%

0.00%

RTP and Other

(16)

0.10%

94

(0.70)%

Warrant Liability

0.00%

(393)

2.70%

Change in valuation allowance

2,378

(13.00)%

2,623

(17.70)%

Tax on Income

$

0.00%

$

0.00%

As of December 31, 2023 and 2022, the Company had no uncertain tax positions. The Company’s policy is to recognize interest and penalties that would be assessed in relation to the settlement value of unrecognized tax benefits as a component of income tax expense. The Company did not accrue either interest or penalties for the years ended December 31, 2023 and 2022.

The Company files income tax returns in the United States federal tax jurisdiction and various state jurisdictions, including New York and New Jersey. The Company did not have any foreign operations during the year ended December 31, 2023. The statute of limitations for assessment by the Internal Revenue Service and state tax authorities is open since inception, and in addition, carryforward tax attributes generated since inception may be adjusted upon examination to the extent utilized in a future period. The Company is not aware of any tax examinations currently taking place.