XML 27 R18.htm IDEA: XBRL DOCUMENT v3.25.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes

8. Income Taxes

A reconciliation of loss before income taxes for domestic and foreign locations for the years ended December 31, 2024 and 2023 is as follows:

 

 

Year Ended
December 31,

 

 

 

2024

 

 

2023

 

United States

 

$

(11,060,506

)

 

$

(8,587,967

)

Foreign

 

 

16,494

 

 

 

19,498

 

Loss before income taxes

 

$

(11,044,012

)

 

$

(8,568,469

)

A reconciliation of income tax expense for the years ended December 31, 2024 and 2023 is as follows:

 

 

 

Year Ended
December 31,

 

Current:

 

2024

 

 

2023

 

Federal

 

$

—

 

 

$

—

 

State

 

 

—

 

 

 

—

 

Foreign

 

 

(5,537

)

 

 

(3,047

)

Total current income tax expense

 

 

(5,537

)

 

 

(3,047

)

Deferred:

 

 

 

 

 

 

Federal

 

 

—

 

 

 

—

 

State

 

 

—

 

 

 

—

 

Foreign

 

 

—

 

 

 

—

 

Total deferred income tax expense

 

 

—

 

 

 

—

 

Total income tax expense

 

$

(5,537

)

 

$

(3,047

)

 

The significant components of deferred income taxes at December 31, 2024 and 2023 are as follows:

 

 

 

Year Ended
December 31,

 

Deferred tax assets:

 

2024

 

 

2023

 

Net operating loss carryforwards

 

$

71,161,394

 

 

$

69,980,468

 

Research tax credits

 

 

9,173,787

 

 

 

10,034,233

 

Stock options

 

 

938,846

 

 

 

1,497,450

 

Other, net

 

 

269,439

 

 

 

355,204

 

Right-of-use liability

 

 

106,148

 

 

 

166,832

 

Research and experimentation capitalization

 

 

3,985,733

 

 

 

2,626,585

 

Total deferred tax assets

 

 

85,635,347

 

 

 

84,660,772

 

Deferred tax liabilities

 

 

 

 

 

 

Right-of-use asset

 

 

(94,000

)

 

 

(152,511

)

In-process research and development

 

 

(1,343,213

)

 

 

(1,343,213

)

Total deferred tax liabilities

 

 

(1,437,213

)

 

 

(1,495,724

)

Net deferred tax assets

 

 

84,198,134

 

 

 

83,165,048

 

Valuation allowance

 

 

(84,399,926

)

 

 

(83,366,840

)

Net deferred tax liability

 

$

(201,792

)

 

$

(201,792

)

 

The Company has established a valuation allowance against net deferred tax assets due to the uncertainty that such assets will be realized. The net change in the valuation allowance during the year ended December 31, 2024 was an increase of $1.0 million. The Company periodically evaluates the recoverability of the deferred tax assets. At such time as it is determined that it is more likely than not that deferred tax assets will be realizable, the valuation allowance will be reduced.

At December 31, 2024, the Company has federal and California net operating loss (NOL) carryforwards of approximately $280.2 million and $193.9 million, respectively. $225.8 million of federal NOL carryforwards begin to expire in 2025, $54.4 million of federal NOL carryforwards can be carried forward indefinitely, and the California NOL carryforwards begin to expire in 2028. At December 31, 2024, the Company also had federal and California research tax credit carry-forwards of approximately $8.3 million and $2.4 million, respectively. The federal research tax credit carryforwards begin to expire in 2025, and the California research tax credit carryforward does not expire and can be carried forward indefinitely until utilized.

The above NOL carryforward and the research tax credit carryforwards are subject to an annual limitation under Section 382 and 383 of the Internal Revenue Code of 1986, and similar state provisions due to ownership change limitations that have occurred which will limit the amount of NOL and tax credit carryforwards that can be utilized to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382 and 383, results from transactions increasing ownership of certain stockholders or public groups in the stock of the corporation by more than 50 percentage points over a three-year period. The Company completed an IRC Section 382/383 analysis regarding the limitation of net operating loss and research and development credit carryforwards for a period of inception through December 2023, and did not experience any ownership changes which triggers the limitation. There is a risk that additional changes in ownership have occurred since the completion of the Company’s analysis. If a change in ownership were to have occurred, additional NOL and tax credit carryforwards could be eliminated or restricted. If eliminated, the related asset would be removed from the deferred tax asset schedule with a corresponding reduction in the valuation allowance. Due to the existence of the valuation allowance, limitations created by future ownership changes, if any, related to the Company’s operations in the United States will not impact the Company’s effective tax rate.

A reconciliation of the federal statutory income tax rate to the Company’s effective income tax rate is as follows:

 

 

 

Year Ended
December 31,

 

 

 

2024

 

 

2023

 

Federal statutory income tax rate

 

 

21.0

%

 

 

21.0

%

State income taxes, net of federal benefit

 

 

4.8

 

 

 

6.3

 

Tax credits

 

 

(0.6

)

 

 

3.8

 

Change in valuation allowance

 

 

(9.4

)

 

 

(11.8

)

Expiration of attributes

 

 

(3.0

)

 

 

(12.0

)

Stock compensation

 

 

(4.0

)

 

 

(1.9

)

Uncertain tax positions

 

 

(8.9

)

 

 

(6.4

)

Other

 

 

0.1

 

 

 

1.0

 

Provision for income taxes

 

 

0.0

%

 

 

0.0

%

 

The Company determines its uncertain tax positions based on a determination of whether and how much of a tax benefit taken by the Company in its tax filings is more likely than not to be sustained upon examination by the relevant income tax authorities.

The following table summarizes the activity related to the Company’s unrecognized tax benefits:

 

 

Year Ended
December 31,

 

 

 

2024

 

 

2023

 

Gross unrecognized tax benefits at January 1

 

$

1,589,266

 

 

$

896,981

 

Additions for tax positions taken in the prior year

 

 

1,079,358

 

 

 

—

 

Additions for tax positions taken in the current year

 

 

28,452

 

 

 

692,285

 

Gross unrecognized tax benefits at December 31

 

$

2,697,076

 

 

$

1,589,266

 

If recognized, none of the unrecognized tax benefits as of December 31, 2024 would reduce the annual effective tax rate, primarily due to corresponding adjustments to the valuation allowance.

The Company files income tax returns in the United States, California and foreign jurisdictions. Due to the Company’s losses incurred, the Company is essentially subject to income tax examination by tax authorities from inception to date. The Company’s policy is to recognize interest expense and penalties related to income tax matters as tax expense. At December 31, 2024, there are no significant accruals for interest related to unrecognized tax benefits or tax penalties. The Company does not expect the unrecognized tax benefits to change significantly over the next twelve months.