| Income Taxes | 20.
Income
Taxes The Company files income tax returns in the United States Federal jurisdiction and various state and foreign jurisdictions.
The Company is subject to United States Federal and state income tax examinations by tax authorities for any years that have net operating losses open until the net operating losses are used.
The components of the net loss before income taxes are as follows:
Year ended December 31,
(In thousands)
2023
2022
Domestic
$
(25,783
)
$
(10,279
)
Foreign
(20
)
(12
)
Net loss before income taxes
$
(25,803
)
$
(10,291
)
In accordance with ASC Topic 740, Income Taxes The income tax provision (benefit)
from continuing operations consists of the following:
(In thousands)
December 31, 2023
December 31, 2022
Current:
Federal
$
-
$
-
State
4
2
Foreign
-
-
Current Tax Provision
$
4
$
2
Deferred:
Federal
$
(3,564
)
$
(5,657
)
State
(459
)
753
Foreign
(3
)
(1
)
Change in valuation allowance
4,026
4,905
Deferred Tax Provision
$
-
$
-
As
of December 31, 2023, and 2022, the Company did not have any undistributed earnings of our foreign subsidiaries. As a result, no
additional income or withholding taxes have been provided for. The Company does not anticipate any impacts of the global intangible low taxed income (“GILTI”) and base erosion anti-abuse tax (“BEAT”) and as such, the Company has not recorded any
impact associated with either GILTI or BEAT. The income tax provision (benefit) amounts differ from the amounts computed by applying the United States Federal statutory
income tax rate of 21% for the years ended December 31, 2023, and 2022. Adjustments to determine income tax expense are as follow:
(In thousands) Years ended December 31,
2023
2022
Tax benefit at statutory rate
$
(5,485
)
$
(2,161
)
Increase (reduction) in income taxes resulting from:
State income tax benefits, net of federal benefit
(307
)
(473
)
Non-deductible gain on warrant adjustment valuation
2,102
(3,270
)
Change in valuation allowance
4,026
4,905
Registration penalties - 67
Other
(332
)
934
Income Tax Expense
$
4
$
2 The tax effects of temporary differences that give rise to the deferred tax assets are as follows:
(In thousands)
December 31, 2023
December 31, 2022
Deferred Tax Assets
Net operating loss carryforwards
$
42,484
$
38,323
Net operating loss carryforwards - foreign
27
24
Excess of tax basis over book value of property and equipment
70
9
Excess of tax basis over book value of intangible assets
1,162
1,325
Lease liability 192 150
Stock-based compensation
1,495
1,487
Accrued employee compensation
338
750
Capitalized equity costs
235
-
Capitalized research and development 1,273 116
Net change in reserve accounts
-
1,031
Gross deferred tax asset
47,276
43,215
Valuation Allowance
(47,096
)
(43,070
)
Net Deferred Tax Asset
180
145
Deferred Tax Liabilities
Right-of-use asset (180 ) (145 )
Gross deferred tax liability (180 ) (145 )
TOTAL $ - $ - On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 (the “Inflation Reduction Act”) into law. The Inflation Reduction Act imposes
an excise tax of 1% on the fair market value of net stock repurchases made after December 31, 2022. The impact of this provision will be dependent on the extent of share repurchases made in future periods. We continue to analyze the impacts of
the Inflation Reduction Act; however, it is not expected to have a material impact on our financial statements. Additionally, the Inflation Reduction Act includes a new corporate alternative minimum tax which is not currently applicable to the
Company. The Tax Cuts and Jobs Act (“TCJA”) requires taxpayers to capitalize and amortize research and development (“R&D”) expenditures under
section 174 for tax years beginning after December 31, 2021. This rule became effective for the Company during 2022 and resulted in capitalized R&D costs of $1.3 million as of December 31, 2023. The Company will amortize these costs for tax purposes over five years
for R&D performed in the U.S. and over 15 years for R&D performed outside the U.S. In 2023, all R&D was performed in the
U.S. 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. In assessing the 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 not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become
deductible. ASC 740 requires that a valuation allowance be established when it is “more likely than not” that all, or a portion of,
deferred tax assets will not be realized. A review of all available positive and negative evidence needs to be considered, including the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies.
After consideration of all the information available, management believes that uncertainty exists with respect to future realization of its deferred tax assets and has, therefore, established a full valuation allowance as of December 31, 2023,
and 2022. The Company’s ability to use its net operating loss carryforwards could be limited and subject to annual limitations. Since
a full analysis under Section 382 of the Internal Revenue Code has not been performed, the Company may realize a “more than 50% change in ownership” which could limit its ability to use its net operating loss carryforwards accumulated to date to
reduce future taxable income and tax liabilities. Additionally, because United States tax laws limit the time during which net operating loss carryforwards may be applied against future taxable income and tax liabilities, the Company may not be
able to take advantage of all or portions of its net operating loss carryforwards for Federal income tax purposes. The Federal net operating loss carryforwards of approximately $77.9 million from years ending December 31, 2005, through December 31, 2017, will begin to expire in 2025 2043 2024 A provision of ASC 740 specifies that companies are to account for uncertainties in income tax reporting, and prescribes a methodology for
recognizing, reversing, and measuring the tax benefits of a tax position taken, or expected to be taken, in a tax return. ASC 740 requires the evaluation of tax positions taken or expected to be taken while preparing the Company’s tax returns to
determine whether the tax positions would “more-likely-than-not” be sustained if challenged by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the
current year. Management has evaluated and concluded that there were no material uncertain tax positions requiring recognition in the Company’s consolidated financial statements as of December 31, 2023, and 2022. The Company does not expect any
significant changes in the unrecognized tax benefits within twelve months of the reporting date. The Company will recognize in income tax expense, interest and penalties related to income tax matters. For the years ended December 31, 2023,
and 2022, the Company did not have any amounts recorded for interest and penalties. |
