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

10. Income taxes

 

Income tax expense for the years ended December 31, 2024 and 2023 consists of the following:

 

 

As of December 31,

 

 

 

2024

 

 

2023

 

 

U.S. federal

 

 

 

 

 

 

 

Current

 

$

(718,582

)

 

$

718,582

 

 

Deferred

 

 

-

 

 

 

-

 

 

Total U.S. federal

 

 

(718,582

)

 

 

718,582

 

 

State and local

 

 

 

 

 

 

 

Current

 

 

(1,705

)

 

 

5,270

 

 

Deferred

 

 

-

 

 

 

-

 

 

Total State and local

 

 

(1,705

)

 

 

5,270

 

 

Income tax expense

 

$

(720,287

)

 

$

723,852

 

 

 

 

 

 

 

 

 

 

 

A reconciliation of income tax benefit at the statutory federal income tax rate and income taxes as reflected in the financial statements is as follows:

 

 

 

As of December 31,

 

 

Rate reconciliation:

 

2024

 

 

 

2023

 

 

Federal tax benefit at statutory rate

 

 

(21.0

)

%

 

 

(21.0

)

%

Permanent differences

 

 

0.6

 

 

 

 

0.2

 

State income tax

 

 

(0.1

)

 

 

 

(0.1

)

 

Research and development credits

 

 

(2.9

)

 

 

 

(2.9

)

 

Change in tax rate

 

 

0.0

 

 

 

 

(0.2

)

 

Change in valuation allowance

 

 

16.0

 

 

 

 

34.2

 

Other

 

 

2.7

 

 

 

 

(0.1

)

Total provision

 

 

(4.7

)

%

 

 

10.10

 

%

 

Deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and tax bases of assets and liabilities using enacted tax rates in effect for years in which differences are expected to reverse.

 

Significant components of the Company's deferred tax assets consisted of the following:

 

 

As of December 31,

 

Deferred tax assets

 

2024

 

 

2023

 

Startup costs

 

$

1,673,301

 

 

$

2,945,099

 

Section 174 capitalization

 

 

3,641,638

 

 

 

1,860,806

 

Share-based compensation

 

 

462,487

 

 

 

144,105

 

Net operating losses

 

 

1,351,896

 

 

 

439,349

 

Accrued expenses and other

 

 

222,198

 

 

 

45,133

 

Capitalized license fees

 

 

41,981

 

 

 

47,526

 

Credit carryforwards

 

 

489,284

 

 

 

30,035

 

Deferred revenue

 

 

250,363

 

 

 

121,388

 

Fixed assets

 

 

(4,074

)

 

 

(8,325

)

Valuation allowance

 

 

(8,129,074

)

 

 

(5,625,116

)

Deferred tax assets, net of valuation allowance

 

$

-

 

 

$

-

 

 

 

 

 

 

 

 

 

As of December 31, 2024 and 2023, the Company had net operating loss carryforwards for federal income tax purposes of approximately $6.2 million and $2.1 million, respectively. Net operating losses are available to offset future federal taxable income. Generally, net operating losses generated after 2017 may be carried forward indefinitely but limited to 80% of federal taxable income each year. As of December 31, 2024, the Company has federal and Texas research and development credit of approximately $0.5 million and $25 thousand, respectively. The Texas research and development credit will begin to expire in 2041 and the federal will begin to expire in 2043. The Company paid $0.7 million in income taxes during the year ended December 31, 2024 for the income tax expense recognized during the year ended December 31, 2023. The Company expects to be refunded the income tax paid in connection with the income tax benefit of $0.7 million recognized during the year ended December 31, 2024, in 2025.

 

 

In assessing the recoverability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company has determined that it is more likely than not that certain future tax benefits may not be realized as a result of current and future income. Accordingly, a valuation allowance has been recorded against all of the Company’s deferred tax assets.

 

Net operating loss and tax credit carry-forwards are subject to review and possible adjustment by the Internal Revenue Service (“IRS”) and are subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50% as defined under Sections 382 and 383 in the Internal Revenue Code. Based upon our analysis, we have determined that such an ownership change has occurred during the year ended December 31, 2023. As a result, a Section 382 limitation will limit the Company's utilization of NOLs and other tax attributes that existed at the date of the change in ownership.

 

The Company recognizes interest and penalties related to uncertain tax positions as a component of income tax expense. The Company had no interest or penalties related to uncertain tax positions. All tax years of the Company from inception are open to examination by federal tax and state tax authorities. To the extent utilized in future years’ tax returns, net operating loss carryforwards as of December 31, 2024 will remain subject to examination until utilized. The Company has not been informed by any tax authorities for any jurisdiction that any of its tax years is under examination as of December 31, 2024.