XML 30 R19.htm IDEA: XBRL DOCUMENT v3.23.1
INCOME TAXES
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES

 

13. INCOME TAXES

 

There was no Federal income tax expense for the years ended December 31, 2022 and 2021 due to the Company’s net losses. Income tax expense represents minimum state taxes due.

 

The blended Federal and State tax rate of 28.50% applies to loss before taxes. The Company’s tax expense differs from the “expected” tax expense for Federal income tax purposes, (computed by applying the United States Federal tax rate of 21% to loss before taxes), as follows (in thousands): 

          
   Year Ended December 31, 
   2022   2021 
Computed “expected” tax expense (benefit)  $(4,136)  $(1,385)
State taxes, net of federal benefit   (1,383)   (568)
Non-deductible stock options   (3)   (329)
Non-deductible items   154    2 
True-up to tax return   9    (41)
Change in deferred tax asset valuation allowance   5,361    2,322 
Total  $2   $1 

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities are as follows (in thousands): 

          
   Year Ended December 31, 
   2022   2021 
Stock options  $701   $407 
Deferred Revenue   118    71 
Capitalized R&D   234    – 
Change in fair value of contingent consideration   1,579    – 
Patents/Intangible Assets   113    – 
Other   278    93 
Net operating loss carryforward   15,372    12,484 
Total gross deferred tax assets   18,395    13,055 
Less: Deferred tax asset valuation allowance   (18,339)   (12,978)
Total net deferred tax assets   56    77 
Deferred tax liabilities:          
Patents   –    (24)
Depreciation   (56)   (53)
Total deferred tax liabilities   (56)   (77)
Total net deferred taxes  $–   $– 

 

As a result of the Company’s history of incurring operating losses, a full valuation allowance has been established. The valuation allowance at December 31, 2022 was $18.3 million. The increase in the valuation allowance during 2022 was $5.4 million.

 

At December 31, 2022, the Company has a net operating loss carry forward of $55.2 million, of which $25.1 million is available to offset future net income through 2037. The net operating loss (“NOL”) expires during the years 2027 to 2037 and $30.1 million may be carried forward indefinitely and limited to offsetting 80% of taxable income. The utilization of the net operating loss carryforwards is dependent upon the ability of the Company to generate sufficient taxable income during the carryforward period. In the event that a significant change in ownership of the Company occurs as a result of the Company’s issuance of common stock, the utilization of the NOL carry forward will be subject to limitation under certain provisions of the Internal Revenue Code. Management does not presently believe that such a change has occurred.

 

No liability related to uncertain tax positions is recorded on the financial statements related to uncertain tax positions. There are no unrecognized tax benefits as of December 31, 2022. The Company does not expect that uncertain tax benefits will materially change in the next 12 months.

 

All tax returns will remain open for examination by the federal and state taxing authorities for three and four years, respectively, from the date of utilization of any net operating loss carryforwards.