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INCOME TAXES
 12 Months Ended
Dec. 31, 2022
INCOME TAXES  
INCOME TAXES

NOTE 16:    INCOME TAXES

The Company has no income tax expense due to operating losses incurred for the years ended December 31, 2022 and 2021.

The effects of temporary differences that give rise to significant portions of the deferred tax assets as of December 31, 2022 and 2021 are as follows:

​

​

​

​

​

​

​

​

​

For the Years Ended

​

​

​

December 31, 

​

​

    

2022

    

2021

 

Deferred Tax Assets

​

​

​

​

​

Net Operating Loss Carryforward

​

30,072,000

​

29,087,000

​

Stock Compensation

​

5,642,000

​

5,599,000

​

Accrued Expenses

​

—

​

510,000

​

License Agreement

​

—

​

127,000

​

Capitalized R&E

​

4,818,000

​

—

​

Research and Development

​

733,000

​

733,000

​

Charitable Contributions

​

—

​

8,000

​

Operating Lease Liability

​

1,611,000

​

2,514,000

​

​

​

42,876,000

​

38,578,000

​

Less: Valuation Allowance

​

(41,413,000)

​

(36,401,000)

​

Total Deferred Tax Assets

​

1,463,000

​

2,177,000

​

​

​

​

​

​

​

Deferred Tax Liabilities

​

​

​

​

​

Fixed Assets

​

(304,000)

​

(94,000)

​

Right-of-Use Assets

​

(1,159,000)

​

(2,083,000)

​

Total Deferred Tax Liabilities

​

(1,463,000)

​

(2,177,000)

​

​

​

​

​

​

​

Net Deferred Tax Assets/(Liabilities)

​

—

​

—

​

​

The Company assesses the likelihood that deferred tax assets will be realized. To the extent that realization is not likely, a valuation allowance is established. Based upon the history of losses, management believes that it is more likely than not, that future benefits of deferred tax assets will not be realized and has established a full valuation allowance for the years ended December 31, 2022 and 2021. The Company has research and development tax credit carryforwards of $733,000 available to offset future federal income taxes. The research and development tax credit carryforwards begin to expire in 2030.

The Company has approximately $135.2 million of federal and $38.5 million of state Net Operating Losses (“NOL”s) that may be available to offset future taxable income, if any. The federal net operating loss carryforwards of $41.6 million, if not utilized, will expire between 2029 and 2037. The federal net operating loss carryforwards of $93.6 million generated in 2018 and thereafter are subject to an 80% limitation on taxable income, do not expire and will carry forward indefinitely. The state net operating loss carryforwards of $21.9 million, if not utilized, will begin to expire in 2035. The state net operating loss carryforwards of $16.6 million generated in 2018 and thereafter are subject to an 80% limitation on taxable income, do not expire and will carry forward indefinitely.

In accordance with Section 382 of the Internal Revenue code, the usage of the Company’s net operating loss carryforwards may be limited in the event of a change in ownership. A full Section 382 analysis has not been prepared and NOLs could be subject to limitation under Section 382.

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.

The Company’s income tax returns for 2018 to 2021 are still open and subject to audit. In addition, net operating losses arising from prior years are also subject to examination at the time they are utilized in future years.

For the years ended December 31, 2022 and 2021, the expected tax expense (benefit) based on the U. S. federal statutory rate is reconciled with the actual tax provision (benefit) as follows:

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​

​

​

​

​

​

​

​

​

​

​

    

For the Years Ended December 31, 

 

​

​

2022

​

2021

 

​

​

​

​

Percent of

​

​

​

Percent of

​

​

    

Amount

    

Pretax Loss

    

Amount

    

Pretax Loss

    

U.S. federal statutory rate

​

(6,285,000)

 

21.00

%  

(8,795,000)

 

21.00

%

State taxes, net of federal benefit

​

(44,000)

 

0.15

%  

(48,000)

 

0.11

%

Tax rate change

​

10,000

 

-0.03

%  

(291,000)

 

0.69

%

Permanent Differences

​

  

 

  

​

  

 

​

​

- Other permanent differences

​

288,000

 

-0.96

%  

262,000

 

-0.63

%

Change in valuation allowance

​

5,012,000

 

-16.75

%  

8,769,000

 

-20.94

%

Deferred true-up

​

1,019,000

 

-3.40

%  

103,000

 

-0.25

%

Income tax provision/(benefit)

​

—

 

0.00

%  

—

 

0.00

%

​

ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. As of December 31, 2022, and 2021, there were no unrecognized tax benefits. The Company recognizes accrued interest and penalties as income tax expense. No amounts were accrued for the payment of interest and penalties at December 31, 2022 and 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position in the next year.