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

7. Income Taxes

 

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. Significant components of the Company’s deferred tax assets as of December 31, 2023 and 2022 are as follows:

 

   2023   2022 
   December 31, 
   2023   2022 
Research credits  $612,000   $574,000 
Capitalized research and development   844,000    — 
Stock-based compensation   1,631,000    2,137,000 
Net operating loss carryforwards   8,601,000    8,135,000 
Total deferred tax assets   11,688,000    10,846,000 
Valuation allowance   (11,688,000)   (10,846,000)
Net deferred tax assets  $—   $— 

 

In assessing the potential realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the Company attaining future taxable income during the periods in which those temporary differences become deductible. As of December 31, 2023 and 2022, management was unable to determine if it is more likely than not that the Company’s deferred tax assets will be realized and has therefore recorded an appropriate valuation allowance against deferred tax assets at such dates.

 

No federal tax provision has been provided for the years ended December 31, 2023 and 2022 due to the losses incurred during such periods. The reconciliation below presents the difference between the income tax rate computed by applying the U.S. federal statutory rate and the effective tax rate for the years ended December 31, 2023 and 2022.

  

    2023     2022  
   

Years Ended December 31,

  
    2023     2022  
             
U. S. federal statutory tax rate     (21.0 )%     (21.0 )%
State income taxes, net of federal tax benefit     (6.0 )%     (6.0 )%
Expirations related to stock-based compensation     10.4 %     1.7 %
Adjustment to deferred tax asset     (0.8 )%     (1.5 )%
Change in valuation allowance     17.4 %     26.8 %
Effective tax rate     0.0 %     0.0 %

 

 

At December 31, 2023, the Company has available net operating loss carryforwards for federal and state income tax purposes of approximately $28,111,000 and $32,617,000, respectively. Federal net operating losses from tax years preceding 2018, if not utilized earlier, expire through 2038. Federal net operating losses generated in a tax year beginning after 2017 have an indefinite carryforward period. The utilization of federal net operating loss carryforwards is subject to various limitations.

 

The state net operating loss carryovers include approximately $19,141,000 that were incurred in the State of New York. New York tax law requires New York net operating loss carryovers from years prior to 2015 to be converted, by applying a formula, into a Prior Net Operating Loss Conversion (PNOLC) subtraction pool. The Company may utilize up to 1/10 of the PNOLC subtraction pool, or $928,313, each year. Unutilized PNOLC amounts carry forward to succeeding years until they expire in 2035. In addition, the full New York net operating losses incurred in post-2015 tax years may be utilized in future tax years. Post-2015 New York net operating losses expire through 2040. The state net operating loss carryovers also include approximately $13,476,000 that was incurred in the State of California.

 

In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, and certain corresponding provisions of state law, if a corporation undergoes an “ownership change”, which is generally defined as a greater than 50% change, by value, in the ownership of its equity over a three-year period, the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income might be limited.

 

As the Company’s net operating losses have yet to be utilized, all previous tax years since 2006 remain subject to adjustment by Federal authorities and other jurisdictions in which the Company currently operates or has operated in the past.