XML 42 R17.htm IDEA: XBRL DOCUMENT v3.23.1
Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Taxes  
Income Taxes

(11) Income Taxes

The federal and state provision (benefit) for income taxes was $0 for the years ended December 31, 2022 and 2021.

A reconciliation of income tax provision (benefit) computed at the statutory federal income tax rate to income taxes as reflected in the financial statements for the years ended December 31, 2022 and 2021 is as follows:

​

​

​

​

​

​

​

​

​

Year Ended

 

​

​

December 31, 

 

​

    

2022

    

2021

 

Federal income tax benefit at statutory rate

 

21.0

%  

21.0

%

State and local tax, net of federal benefit

 

5.7

%  

13.7

%

Permanent differences

 

(1.5)

%  

0.1

%

Research and development credit

​

3.8

%  

2.4

%

Stock-based compensation

​

0.8

%  

15.7

%

Change in valuation allowance

 

(29.8)

%  

(52.9)

%

Effective income tax rate

 

0.0

%  

0.0

%

​

Deferred taxes are recognized for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. The significant components of the Company’s deferred tax assets are comprised of the following:

​

​

​

​

​

​

​

​

​

​

As of December 31, 

​

    

2022

    

2021

Net operating loss carryforwards

​

$

7,919,085

​

$

6,512,249

Stock compensation

​

 

3,767,330

​

 

1,759,129

Capitalized R&D

​

​

1,725,622

​

​

2,002,431

Section 174

​

​

3,445,935

​

​

​

R&D credit carryforwards

​

 

1,618,295

​

 

648,077

Total deferred tax assets

​

 

18,476,267

​

 

10,921,886

Less valuation allowance

​

 

(18,476,267)

​

 

(10,921,886)

Net deferred taxes

​

$

—

​

$

—

​

As of December 31, 2022, the Company had U.S. federal net operating loss (“NOL”) carryforwards of $27,536,031 which may be available to offset future income tax liabilities. Federal NOL carryforwards generated in 2017 and prior of $2,764,240 will expire beginning in 2032. The remaining federal NOL carryforwards generated in 2018 and later do not expire. As of December 31, 2022, the Company also had U.S. state NOL carryforwards of $30,082,914 which may be available to offset future income tax liabilities and will expire beginning in 2028.

The Company has recorded a full valuation allowance against its net deferred tax assets as of December 31, 2022 and 2021 because the Company has determined that is it more likely than not that these assets will not be fully realized due to historic net operating losses incurred. The Company experienced a net change in valuation allowance of $7,554,381 and $7,672,071 in the years ended December 31, 2022 and 2021, respectively.

As of December 31, 2022, the Company had federal research and development tax credit carryforwards of $1,618,294 available to reduce future tax liabilities which expire beginning in 2028.

Under the provisions of the Internal Revenue Code, the NOL and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. NOL and tax credit carryforwards may become 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 of the Internal Revenue Code as well as similar state provisions. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. The Company has completed financings since its inception which may have resulted in a change in control as defined by Sections 382 and 383 of the Internal Revenue Code, or could result in a change in control in the future.

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. The Company’s tax years from

2019 to the present remain open for review. All open years may be examined to the extent that tax credits or NOL carryforwards are used in future periods. The Company will recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2022, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s statements of operations.

Effective for tax years beginning after December 31, 2021, taxpayers are required to capitalize any expenses incurred that are considered incidental to research and experimentation (R&E) activities under IRC Section 174. While taxpayers historically had the option of deducting these expenses under IRC Section 174, the December 2017 Tax Cuts and Jobs Act mandates capitalization and amortization of R&E expenses for tax years beginning after December 31, 2021. Expenses incurred in connection with R&E activities in the US must be amortized over a 5-year period if incurred, and R&E expenses incurred outside the US must be amortized over a 15-year period. R&E activities are broader in scope than qualified research activities considered under IRC Section 41 (relating to the research tax credit). For the year ended December 31, 2022, the Company performed an analysis based on available guidance and determined that it will continue to be in a loss position even after the required capitalization and amortization of its R&E expenses. The Company will continue to monitor this issue for future developments, but it does not expect R&E capitalization and amortization to require it to pay cash taxes now or in the near future.