Annual report pursuant to Section 13 and 15(d)

Note 14- Income Taxes

v3.23.1
Note 14- Income Taxes
 12 Months Ended
Dec. 31, 2022
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

14.

Income Taxes

 

The components of our deferred tax assets (“DTAs”) as of December 31, 2022 and 2021 are summarized in the following table:

 

   

As of December 31,

  
   

2022

    

2021

  
Deferred tax assets:                

Net operating loss carryforwards

   $ 39,200,586     $ 36,793,074  

R&D credit carryforwards*

     9,256,968       9,501,299  

Stock compensation

     286,724       481,098  

Intangibles

     455,959       567,213  

Accrued expenses

     710,940       —  

Capitalized §174 expenses

     1,116,433       —  

Disallowed interest expense

     —       851,247  

Temporary differences

     196,575       305,974  

Deferred tax assets before valuation allowance

     51,224,185       48,499,905  

Valuation allowance

     (51,224,185

)

     (48,499,905

)

Net deferred tax assets

   $ —     $ —  

 

* Includes U.S. R&D credit carryforwards of $8,868,343 and state R&D credit carryforwards of $388,625 as of December 31, 2022.

footnote

Current accounting standards require a valuation allowance against DTAs if, based on the weight of available evidence, it is more likely than not that some or all of the DTAs may not be realized. Due to the uncertainty surrounding the realization of these DTAs in future tax returns, all of the DTAs have been fully offset by a valuation allowance as of December 31, 2022 and 2021.

 

In assessing the realizability of DTAs, management considers whether it is more likely than not that some portion or all of the DTAs will not be realized. The ultimate realization of DTAs is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods) and projected future taxable income in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the DTAs are deductible, management believes it is more likely than not that the Company will not realize the benefits of these deductible differences or tax carryforwards as of December 31, 2022.

 

As of December 31, 2022 and 2021, we had U.S. net operating loss carryforwards of $175,127,244 and $168,776,440, respectively. As of December 31, 2022 and 2021, we also had state net operating loss carryforwards of $20,068,842. The state net operating loss carryforwards will begin expiring in 2027.

 

There were no expirations of U.S. NOL carryforwards during 2022 or 2021. U.S. R&D credit carryforwards of $5,350 and $0 expired during 2022 and 2021, respectively.

 

The details of our U.S. net operating loss and federal R&D credit carryforward amounts and expiration dates as of December 31, 2022 are summarized in the following table:

 

As of December 31, 2022

  

U.S. Net Operating Loss Carryforwards

    

U.S. R&D Credit Carryforwards

  

Generated

  

Expiration

    

Amount

    

Generated

    

Expiration

    

Amount

  

2003

   2023     $ —     2003       2023     $ 2,905  

2004

   2024       —     2004       2024       22,861  

2005

   2025       —     2005       2025       218,332  

2006

   2026       —     2006       2026       365,541  

2007

   2027       —     2007       2027       342,898  

2008

   2028       —     2008       2028       531,539  

2009

   2029       —     2009       2029       596,843  

2010

   2030       —     2010       2030       1,094,449  

2011

   2031       —     2011       2031       1,950,744  

2012

   2032       18,898,490     2012       2032       468,008  

2013

   2033       37,450,522     2013       2033       681,772  

2014

   2034       34,088,874     2014       2034       816,116  

2015

   2035       25,073,846     2015       2035       492,732  

2016

   2036       15,581,209     2016       2036       262,257  

2017

   2037       —     2017       2037       387,892  

2018

   N/A       —     2018       2038       197,547  

2019

   N/A       11,245,808     2019       2039       213,065  

2020

   N/A       11,018,478     2020       2040       222,842  

2021

   N/A       15,419,213     2021       2041       —  

2022

   N/A       6,350,804     2022       2042       —  
Total carryforwards     $ 175,127,244     Total carryforwards     $ 8,868,343  

 

Under Sections 382 and 383 of the Internal Revenue Code (“IRC”) of 1986, as amended, the utilization of U.S. net operating loss and R&D tax credit carryforwards may be limited under the change in stock ownership rules of the IRC. The Company completed a Section 382 analysis through December 31, 2022 and believes that a Section 382 ownership change has not occurred.

 

Reconciliations between the statutory federal income tax rate and our effective tax rate for continuing operations are presented in the following table:

 

   

2022

    

2021

  
   

Amount

    

%

    

Amount

    

%

  

Benefit at statutory rate

   $ (3,137,533

)

     (21.0

)%

   $ (2,460,126

)

     (21.0

)%

Adjustments to valuation allowance

     2,724,281       17.9

%

     2,676,868       22.9

%

Adjustments to R&D credit carryforwards

     —       —       (199,589

)

     (1.7

)%

Permanent items and other

     413,252       3.1 %     (1,110 )     (0.1

)%

Provision (benefit) per financial statements

   $ —             $ 16,043