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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
A reconciliation of the effect of applying the federal statutory rate to the net loss and the effective income tax rate are as follows:
20232022
Statutory federal income tax rate21.0 %21.0 %
State tax, net of federal benefit(3.2)%6.1 %
Permanent differences(0.9)%(0.9)%
Federal research and development credits4.1 %2.3 %
State research and development credits— %0.2 %
Uncertain tax positions(0.4)%(0.3)%
Other differences0.1 %0.9 %
Change in valuation allowance(20.7)%(29.3)%
Effective income tax rate— %— %
As of December 31, 2023 and 2022, the components and tax effects of each type of item that gave rise to the net deferred tax assets were as follows:
20232022
Deferred tax assets:
Stock-based compensation expense$1,387,849 $1,059,866 
Research expenses16,282,709 6,758,291 
Unrealized losses172 10,419 
Accrued Bonus602,121 — 
R&D credit carryforward6,295,756 4,146,850 
NOL carryforward19,095,948 20,842,910 
Gross deferred tax assets43,664,555 32,818,336 
Valuation allowance(43,274,909)(32,039,948)
Net deferred tax assets389,646 778,388 
Net deferred tax liabilities:
Prepaid expenses deducted for tax(173,497)(353,224)
Right of use(103,034)(117,445)
Tax depreciation in excess of book(113,115)(307,719)
Total deferred tax liabilities(389,646)(778,388)
Net deferred taxes$— $— 
Federal net operating losses (“NOL”) generated in tax years ended after December 31, 2017 are limited to 80% of taxable income, only carried forward and carried forward indefinitely under the Internal Revenue Code of 1986, as amended (the “IRC”). The Company recorded a deferred tax liability of $304,485 on the acquisition of BioArkive. It had pre-existing deferred tax assets for which there was a full valuation allowance. As a result of the taxable temporary differences recognized in the business combination, the Company released $304,485 of its valuation allowance and recognized the income tax benefit in the income statement at the acquisition date in accordance with ASC Topic 740, Income Taxes ("ASC 740"). There was no income tax expense or benefit in 2023. The Company has provided a valuation allowance for the full amount of the net deferred tax assets as, based on all available evidence, it is considered more likely than not that all the recorded deferred tax assets will not be realized in a future period. At December 31, 2023, the Company has federal and state NOLs of $75,737,889 and $42,123,069, respectively, all generated after the tax year ended December 31, 2017. At December 31, 2023, the Company has federal and state research and development credit carryforwards of $5,845,815 and $1,149,466, respectively, that start to expire beginning in 2026.
As the Company has not yet achieved profitable operations, management believes the tax benefits as of December 31, 2023 did not satisfy the realization criteria set forth in ASC 740 and, therefore, has recorded a full valuation allowance for the entire deferred tax asset. The valuation allowance increased in 2023 by $11,234,961 due to the increase in the deferred tax assets by the same amount, primarily due to NOL and research and development expenses.
Utilization of the U.S. net operating loss carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Section 382 of the IRC, 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 carryforwards that can be utilized annually to offset future taxable income. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50% over a three-year period. The Company has not conducted a study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception due to the significant complexity and cost associated with such a study. If the Company has experienced a change of control, as defined by Section 382, at any time since inception, utilization of the net operating loss carryforwards or research and development tax credit carryforwards would be subject to an annual limitation under Section 382, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required. Any limitation may result in expiration of a portion of the net operating loss carryforwards or research and development tax credit carryforwards before 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.
As of December 31, 2023 and December 31, 2022, the Company had uncertain tax positions of $699,527 and $541,067, respectively. The Company has classified the unrecognized tax benefits as reductions of its tax carryforwards. The Company has elected to recognize interest and penalties related to income tax matters as a component of income tax expense, of which no interest or penalties were recorded for the years ended December 31, 2023 and 2022.
As of December 31, 2023 and December 31, 2022, unrecognized tax benefits were as follows:
20232022
Beginning balance$541,067 $380,902 
Increase due to current year tax position158,460 160,165 
Ending balance$699,527 $541,067 
The Company files tax returns in the United States including California, New York, Pennsylvania, Massachusetts and Texas. All tax years from 2017 to 2023 remain open to examination by the major taxing jurisdictions to which the Company is subject, as carryforward attributes generated in years past may still be adjusted upon examination by the Internal Revenue Service (“IRS”) or other authorities if they have or will be used in a future period. The Company is not to its knowledge currently under examination by the IRS or in any other jurisdictions for any tax years.