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INCOME TAXES
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES

NOTE 14 – INCOME TAXES

 

Income tax expense differs from the statutory amounts for each of the following years (in thousands):

  

   2024   2023 
   For the year ended December 31, 
   2024   2023 
         
Income taxes at U.S. statutory rate  $(13,384)  $(11,379)
State tax, net of federal benefit   (679)   (242)
Research and development credit   (1,535)   (1,137)
Deferred true ups   8,032    — 
Valuation allowance   5,418    8,687 
Change in fair value of warrant liabilities   159    2,456 
Expired tax losses and credits   2,116    1,503 
Permanent differences   (127)   112 
Total tax expense  $—   $— 

 

Deferred taxes are provided for the temporary differences between the financial reporting bases and the tax bases of the Company’s assets and liabilities. The temporary differences that give rise to deferred tax assets and liabilities were as follows (in thousands):

  

   2024   2023 
   For the year ended December 31, 
   2024   2023 
         
Deferred tax assets (liabilities):          
Net operating loss carryforwards  $88,059   $78,698 
General business credit carryforwards   6,000    4,752 
State credits   2,780    2,780 
Property, equipment and goodwill   1,002    887 
Stock based compensation   2,463    11,983 
Intangible assets   661    615 
Accruals   107    347 
Capitalized research and development   13,264    8,843 
Other   70    83 
Gross deferred tax assets   114,406    108,988 
Valuation allowance   (114,406)   (108,988)
Net deferred taxes  $—   $— 

 

As of December 31, 2024, the Company identified adjustments related primarily to the recognition of deferred tax assets for stock-based compensation. As a result, the Company has written off $8.0 million of deferred tax assets in the current period, with a corresponding adjustment to the valuation allowance. There was no impact to total tax expense in the prior periods or current period.

 

 

Net operating Loss and Other Carryforwards

 

As of December 31, 2024, the Company had $416.1 million of U.S. federal net operating loss carryforwards and $6.0 million of general business credit carryforwards. These carryforwards expire as follows (in thousands):

  

   Net operating
loss carryforwards		   General
business credit
carryforwards		 
         
2025  $2,370   $182 
2026   7,160    72 
2027   9,977    93 
2028   6,886    141 
2029   7,908    83 
Thereafter   65,644    5,429 
   $99,945   $6,000 

 

On December 22, 2017, the “Tax Cuts and Jobs Act” was signed into law. The tax reform has the following effects on the Company: (1) permanently reduces the maximum corporate income tax rate from 35% to 21% effective for tax years beginning after December 31, 2017, (2) allows temporary 100% expensing for certain business assets and property placed in service after September 27, 2018 and before January 1, 2023, (3) disallows NOL carrybacks but allows for the indefinite carryforward of those NOLs which applies to losses arising in tax years beginning after December 31, 2018 and, (4) limits NOL deductions for each year equal to the lesser of the available carryover or 80% of a taxpayer’s pre-NOL deduction taxable income. This applies to losses arising in tax years ending on or after December 31, 2017. As of December 31, 2024 and 2023, the Company has concluded that it is more likely than not that the Company will not realize the benefit of its deferred tax assets due to its history of losses. Accordingly, the net deferred tax assets have been fully reserved.

 

In accordance with Section 382 of the Internal Revenue Code of 1986, as amended, a change in equity ownership of greater than 50% within a three-year period results in an annual limitation on the Company’s ability to utilize its NOL carryforwards created during the tax periods prior to the change in ownership. The Company has not completed an ownership change analysis pursuant to Section 382. Because the Company has incurred cumulative net operating losses since inception, all tax years remain open to examination by U.S. federal and state income tax authorities.

 

As of December 31, 2024, the Company had $316.2 million of U.S. federal net operating loss carryforwards that do not expire and can be carried forward indefinitely. Such net operating loss carryforwards can only be used to offset 80% of taxable income in any given tax year. The Company also has $13.3 million of state net operating loss carryforwards in varying amounts depending on the different state tax laws.

 

The Company acquired MacroChem Corporation on March 25, 2009, and Somanta Pharmaceuticals, Inc. on January 4, 2008. Both of these corporations were loss-making entities at the time of acquisition. As a result, the net operating losses related to those acquisitions may be subject to annual limitations. The Company has not performed a study to determine whether or not there is such a limitation.

 

Valuation Allowance

 

At December 31, 2024 and 2023, the Company maintained a full valuation allowance on its deferred tax assets based on a history of cumulative losses. The Company will not record income tax benefits in the financial statements until it is determined that it is more likely than not that the Company will generate sufficient taxable income to realize the deferred income tax assets. In 2024, the valuation allowance increased by approximately $5.4 million. In 2023, the valuation allowance increased by approximately $8.7 million.

 

 

Unrecognized Tax Benefits

 

At December 31, 2024 and 2023, the Company had no reserves for unrecognized tax benefits.

 

The Company and its subsidiaries are subject to taxation in the United States. The Company is subject to U.S. federal and state examinations for 2020 and forward, and 2019 and forward, respectively. However, net operating losses are subject to audit in any tax year in which those losses are utilized, notwithstanding the year of origin.