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

16. Income Taxes

 

The Domestic and foreign Components of loss before taxes are:

 

 

 

Year Ended

December 31,

 

 

Six Months Ended

 December 31,

 

 

Year Ended

June 30,

 

 

 

2023

 

 

2022

 

 

2022

 

U.S. operations

 

$(5,352,700)

 

$(3,285,900)

 

$(8,985,600)

Non-U.S. operations

 

 

(3,737,100)

 

 

(787,200)

 

 

(2,296,100)

Total loss before taxes

 

$(9,089,800)

 

$(4,073,100)

 

$(11,281,700)

The provision for income taxes is comprised of:

 

 

 

Year Ended

December 31,

 

 

Six Months  Ended

December 31,

 

 

Year Ended

June 30,

 

 

 

2023

 

 

2022

 

 

2022

 

U.S. federal taxes:

 

 

 

 

 

 

 

 

 

Current

 

$-

 

 

$-

 

 

$(99,200)

Deferred

 

 

-

 

 

 

-

 

 

 

1,693,700

 

Non-U.S. taxes:

 

 

-

 

 

 

-

 

 

 

-

 

Current

 

 

-

 

 

 

-

 

 

 

-

 

Deferred

 

 

-

 

 

 

-

 

 

 

800,300

 

Total provision for income taxes

 

$-

 

 

$-

 

 

$2,394,800

 

   

Total provision for income taxes allocated to continuing operations for the year ended December, 31, 2023, for the six month ended December 31, 2022 and for the year ended June 30, 2022, respectively was $0, $0, and $2,390,800, respectively.

 

Total provision for income taxes allocated to discontinued operations for the year ended December, 31, 2023, for the six month ended December 31, 2022 and for the year ended June 30, 2022, respectively was $0, $0, and $4,000, respectively.

 

In accordance with ASC 740 “Accounting for Income Taxes” (“ASC 740”), the Company evaluated the deferred tax assets to determine if valuation allowances are required or should be adjusted. ASC 740 requires that companies assess whether valuation allowances should be established against their deferred tax assets based on consideration of all available evidence, both positive and negative, using a “more likely than not” standard of whether the deferred tax assets will be realized. As of and for the year ended December 31, 2023, the Company maintains a full valuation allowance of $9,302,300 against the consolidated net deferred tax assets as the Company determined the net deferred tax assets which includes net operating loss carry-forwards and other tax credits, are more likely not to be realized and therefore the Company recorded a full valuation allowance. During the six months ended December 31, 2022, the Company recorded a full valuation allowance of $1,302,600 to the period change in the net deferred tax assets as the Company determined the net deferred tax assets which includes net operating loss carry-forwards and other tax credits, are more likely not to be realized and therefore the Company recorded a full valuation allowance. As of and for the fiscal year ended June 30, 2022, the Company recorded a full valuation allowance of $5,116,000 against the consolidated net deferred tax assets as the Company determined the net deferred tax assets which includes net operating loss carry-forwards and other tax credits, are more likely not to be realized. In the event that in the future the Company changes the determination as to the amount of deferred tax assets that can be realized, the Company will adjust the valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.

The reconciliation of the provision for income taxes at the federal statutory rate of 21% to the actual income tax expense (benefit) for the applicable fiscal year is as follows:

 

 

 

Year Ended

December 31,

 

 

Six Months

Ended December 31,

 

 

Year Ended

June 30,

 

 

 

2023

 

 

2022

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

Computed "expected" income tax benefit

 

$(1,908,900)

 

$(855,400)

 

$(2,369,200)

Research and development credits

 

 

(9,400)

 

 

(49,600)

 

 

(99,200)

Incentive Stock Option Expense

 

 

73,300

 

 

 

36,600

 

 

 

64,300

 

PPP Loan Forgiveness

 

 

-

 

 

 

-

 

 

 

(91,100)

Valuation allowance

 

 

2,883,700

 

 

 

1,302,600

 

 

 

5,116,000

 

Aquila Biolabs GmbH operating loss

 

 

(1,150,800)

 

 

(245,700)

 

 

(717,100)

Return to provision and other true-ups

 

 

112,100

 

 

 

(187,800)

 

 

-

 

Other, net

 

 

-

 

 

 

(700)

 

 

491,100

 

Income tax expense

 

$-

 

 

$-

 

 

$2,394,800

 

 

Income tax expense allocated to continuing operations for the year ended December 31, 2023, for the six month ended December 31, 2022, and for the year ended June 30, 2022, respectively was $0, $0, and $2,390,800, respectively.

 

Income tax expense allocated to discontinued operations for the year ended December 31, 2023, for the six month ended December 31, 2022, and for the year ended June 30, 2022, respectively was $0, $0, and $4,000, respectively.

 

The Company’s expected income tax expense differs from its provision for income tax expense primarily due to the Company’s evaluation of its net deferred tax assets and the Company’s related assessment to record a full valuation allowance against those net deferred tax assets in applying the more-likely than not standard that is required under the applicable guidance under Generally Accepted Accounting Principles in the US.

 

Deferred tax assets and liabilities consist of the following:

  

 

 

As of

December 31,

 

 

As of

December 31,

 

 

As of

June 30,

 

Deferred tax assets:

 

2023

 

 

2022

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

Amortization of intangible assets, including goodwill

 

$106,300

 

 

$377,800

 

 

$326,600

 

Research and development credits

 

 

426,400

 

 

 

416,900

 

 

 

367,400

 

Goodwill impairment

 

 

898,800

 

 

 

898,800

 

 

 

898,800

 

Capitalized research and development expenses

 

 

957,900

 

 

 

276,900

 

 

 

-

 

Various accruals

 

 

103,300

 

 

 

92,200

 

 

 

50,400

 

Stock options expense

 

 

1,486,400

 

 

 

1,047,600

 

 

 

710,500

 

Net operating loss

 

 

5,383,200

 

 

 

3,353,100

 

 

 

2,769,400

 

Other

 

 

27,200

 

 

 

57,600

 

 

 

52,900

 

  Subtotal

 

$9,389,500

 

 

$6,520,900

 

 

$5,176,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred tax liability:

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation of property

 

 

(87,200)

 

 

(102,300)

 

 

(60,000)

 

 

 

 

 

 

 

 

 

 

 

 

 

Less valuation allowance

 

 

(9,302,300)

 

 

(6,418,600)

 

 

(5,116,000)

Net deferred tax assets

 

$-

 

 

$-

 

 

$-

 

 

The Company has federal net operating loss (“NOL”) carryforwards of $20,154,400, $7,571,300 and $5,961,700 as of December 31, 2023, and 2022 and June 30, 2022, respectively, with no expiration date, which are available to reduce future taxable income. The Company has foreign NOL carryforwards of $9,330,700, $5,645,900 and $4,858,700 as of December 31, 2023, and 2022 and June 30, 2022, respectively, with no expiration date, which are available to reduce future taxable income. Under the 2017 Tax Cuts and Jobs Act (the “TCJA”), federal carryforwards may be carried forward indefinitely. All of the Company’s NOL carryforwards were generated on or after December 31, 2017, the effective date for TCJA NOL’s.