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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes

(5) Income Taxes

The Company is subject to taxation in the United States and in various state, local and foreign jurisdictions. The Company remains subject to examination by U.S. Federal, state, local and foreign tax authorities for tax years 2019 through 2022. With few exceptions, the Company is no longer subject to U.S. Federal state, and foreign examinations by tax authorities for the tax year 2019. However, net operating losses from the tax year 2017 would be subject to examination if and when used in a future tax return to offset taxable income. The Company’s policy is to recognize income tax related penalties and interest, if any, in its provision for income taxes and, to the extent applicable, in the corresponding income tax assets and liabilities, including any amounts for uncertain tax positions.

As of December 31, 2023, the Company had available net operating loss carryforwards of $52.3 million for Federal and state income tax purposes, which are available to offset future Federal and state taxable income, if any. $52.1 million of these Federal net operating loss carryforwards do not expire, while the remaining net operating loss carryforwards expire in 2037. The Company’s ability to use these net operating losses is limited by change of control provisions under Internal Revenue Code ("IRC") Section 382 and may expire unused. The Company also has foreign net operating loss carryforwards, which do not expire, available to offset future foreign taxable income of $20.5 million generated in the United Kingdom and $9.1 million in Belgium. The potential impacts of these provisions are among the items considered and reflected in the Company’s assessment of its valuation allowance requirements.

Beginning January 1, 2022, the Tax Cuts and Jobs Act (the "Tax Act") eliminated the option to deduct research and development expenditures in the current year and requires taxpayers to capitalize such expenses pursuant to IRC Section 174. The capitalized expenses are amortized over a 5-year period for domestic expenses and a 15-year period for foreign expenses. We have included the impact of this provision, which results in additional deferred tax assets of approximately $6.5 and $4.2 million as of December 31, 2023 and 2022 respectively.

The tax effect of temporary differences and net operating loss carryforwards that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2023 and 2022 are presented below (in thousands).

 

 

December 31,

 

 

2023

 

 

2022

 

Deferred tax assets:

 

 

 

 

 

 

U.S. Federal and state net operating loss carryforwards

 

$

13,804

 

 

$

11,411

 

Foreign net operating loss carryforwards

 

 

7,819

 

 

 

6,224

 

Research and development tax credits

 

 

341

 

 

 

—

 

Share-based compensation

 

 

269

 

 

 

441

 

Capitalized research expenses

 

 

6,515

 

 

 

4,154

 

Other

 

 

926

 

 

 

427

 

Total deferred tax assets

 

 

29,674

 

 

 

22,657

 

Less: valuation allowance

 

 

(29,674

)

 

 

(22,657

)

Net deferred tax assets

 

$

—

 

 

$

—

 

 

In assessing the realizability 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 ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the net operating loss and tax credit carryforwards can be utilized or the temporary differences become deductible. The Company considers projected future taxable income and tax planning strategies in making this assessment. To fully realize the deferred tax asset, the Company will need to generate future taxable income sufficient to utilize net operating losses prior to their expiration. Based upon the Company’s history of not generating taxable income, the Company believes that it is more likely than not that deferred tax assets will not be realized through future earnings. Accordingly, a valuation allowance has been established for the full value of the deferred tax assets. The valuation allowance on the deferred tax assets increased by $7.0 million and $4.0 million during the years ended December 31, 2023 and 2022, respectively.

Income tax benefit was nil for the years ended December 31, 2023 and 2022. Income taxes recorded differed from the amounts computed by applying the U.S. Federal income tax rate of 21% in 2023 and 2022 to loss before income taxes as a result of the following (in thousands).

 

 

December 31,

 

 

2023

 

 

2022

 

Computed “expected” Federal tax benefit

 

$

(4,716

)

 

$

(5,878

)

(Increase) reduction in income taxes benefit resulting from:

 

 

 

 

 

 

Change in valuation allowance

 

 

5,987

 

 

 

4,028

 

Foreign rate change

 

 

—

 

 

 

(842

)

Foreign income inclusion

 

 

(21

)

 

 

530

 

State and local income benefit, net of Federal income tax benefit

 

 

(1,693

)

 

 

(104

)

Return-to-provision adjustment

 

 

—

 

 

 

1,393

 

Foreign rate differential

 

 

—

 

 

 

286

 

Permanent differences

 

 

840

 

 

 

348

 

Other, net

 

 

(397

)

 

 

239

 

Income tax benefit

 

$

—

 

 

$

—