Annual report [Section 13 and 15(d), not S-K Item 405]

Income Taxes

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Income Taxes
12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes

10. Income Taxes

 

The components of the provision for income taxes for the years ended December 31, 2024 and 2023 are as follows:

 

    2024     2023  
Current   $     $  
Deferred     (1,408,287 )     (5,791,558 )
Valuation Allowance     1,408,287       5,791,558  
Total provision (Deferred benefit) for income taxes   $     $  

 

 

 

At December 31, 2024 and 2023, the Company had temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective income tax bases, as measured by enacted state and federal tax rates, as follows:

 

    2024     2023  
Deferred tax assets (liabilities):                
Net operating loss carryforward   $ 41,070,043      $ 39,810,409  
Accrued vacation     13,421       -  
Non-qualified stock compensation     1,228,004       1,160,775  
Capitalized Research & Development costs     3,694,354       3,417,706  
Intangibles     2,360,913       2,569,559  
Total deferred tax assets     48,366,736       46,958,449  
Less valuation allowance     (48,366,736 )     (46,958,449 )
Total net deferred tax asset, net of valuation allowance   $     $  

 

The following is a reconciliation of tax computed at the statutory federal rate to the income tax expense (benefit) in the statements of operations for the years ended December 31, 2024 and 2023:

 

    2024     2023  
Income tax benefit computed at statutory federal rate of 21% and 21%, respectively   $ (2,207,843 )   $ (4,337,705 )
State income tax benefits, net of federal expense/benefit     (400,411 )     (1,204,720 )
Australia Tax     (60,962 )    
Prior year adjustment           150,533  
Change in valuation allowance     2,027,835       5,342,529  
Non-deductible expenses     1,100       272  
Change in tax rates     590,690        
Other     49,590        49,091  
Total provision (benefit) for income taxes   $     $  

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the levels of historical taxable income and projections of future taxable income over which the deferred tax assets are deductible, the Company believes that it is more likely than not that it will not be able to realize the benefits of these deductible differences.

 

Accordingly, a valuation allowance of $48,366,736 and $46,958,449 has been provided in the accompanying consolidated financial statements as of December 31, 2024 and 2023, respectively. The December 31, 2024 and December 31, 2023 net change in valuation allowance related to deferred tax assets was an increase of $1,408,287 and $5,791,558, respectively, primarily relating to the capitalization of research and development costs and net operating loss carryforwards.

 

At December 31, 2024, the Company has federal and state tax net operating loss carryforwards of $159,358,389 and $142,594,207, respectively. The State of Pennsylvania tax net operating loss carryforwards will expire through 2036. Federal and Florida tax net operating loss carryforwards generated prior to December 31, 2017 will expire through 2037 and are not subject to taxable income limitations. Federal and Florida tax net operating loss carryforwards generated subsequent to December 31, 2017, do not expire but may be subject to taxable income limitation pursuant to the Tax Cuts and Jobs Act that was enacted on December 22, 2017. The Company also has federal research and development tax credit carryforwards of $4,041,694 of which are included as an uncertain tax position. The federal tax credit carryforward will expire beginning in 2021 and continuing through 2043 unless utilized.

 

Utilization of net operating loss carryforwards and research and development credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that may have occurred or, could occur in the future in accordance with Section 382 of the Internal Revenue Code of 1986 (“IRC Section 382”) and with Section 383 of the Internal Revenue Code of 1986, as well as similar state provisions. These ownership changes may limit the amount of net operating loss carryforwards and research and development credit carryforwards that can be utilized annually to offset future taxable income and taxes, respectively. In general, an ownership change, as defined by IRC Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50 percentage points over a three-year period. The Company has completed several financings since its inception which may result in a change in ownership as defined by IRC Section 382, or could result in a change in control in the future.

 

For the years ended December 31, 2024 and 2023, the Company incurred $0 and $0, respectively, of additional unrecognized tax benefits that related to research and development credits. The entire amount of this unrecognized tax benefit, if recognized, would result in an increase to the deferred tax asset valuation allowance, and would not have an impact on the effective tax rate.

 

 

The Company files its income tax returns in the U.S. federal jurisdiction and in Florida and Pennsylvania. With few exceptions, the Company is no longer subject to federal or state income tax examinations by tax authorities for years before 2016.

 

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

 

Balance as of December 31, 2021   $ 4,027,180  
Additions based on tax positions related to the current year     940,106  
Reductions for the tax positions of prior years     (115,396 )
Expired Tax Credits due to 20-year life     (17,043 )
Balance as of December 31, 2022   $ 4,834,847  
Additions based on tax positions related to the current year     46,229  
Reductions for the tax positions of prior years     (680,042 )
Expired Tax Credits due to 20-year life     (31,680 )
Balance as of December 31, 2023   $ 4,169,354  
Additions based on tax positions related to the current year      
Reductions for the tax positions of prior years     (46,229 )
Expired Tax Credits due to 20-year life     (81,431 )
Balance as of December 31, 2024   $ 4,041,694  

 

Included in the balance at December 31, 2024 and 2023, are $4,041,694 and $4,169,354, respectively, of tax positions for which there is uncertainty about the validity of certain credits. The disallowance of the credits would impact the amount of gross deferred tax assets reflected in the accompanying footnotes.

 

During the years 2024 and 2023 the Company did not recognize any interest and penalties. Due to the potential offset of the Company’s operating loss carryforward for any future activity, the amount attributed to interest and penalties would be immaterial.