Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.23.1
Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes

Note 12 – Income Taxes

 

During the years ended December 31, 2022 and the nine months ended December 31, 2021, the Company did not record a provision for income taxes due to the recognition of a full valuation allowance.

 

As of December 31, 2022, the Company has net operating loss carryforwards of approximately $34.2 million and $24.2 million available to reduce future taxable income, for federal and state income tax purposes, respectively. Under the Tax Cuts and Jobs Act, the Federal NOLs of approximately $34.2 million incurred during the years ended after December 31, 2017 can be carried forward indefinitely, but are limited in utilization to 80% of taxable income each year. Approximately $26,000 of the federal NOL will expire in 2037. The state net operating loss carryforwards will begin to expire in 2037.

 

Under the Internal Revenue Code (“IRC”) Section 382, annual use of the Company’s net operating loss carryforwards to offset taxable income may be limited based on cumulative changes in ownership. The Company has not completed an analysis to determine whether any such limitations have been triggered as of December 31, 2022. The Company has no income tax effect due to the recognition of a full valuation allowance on the expected tax benefits of future loss carry forwards based on uncertainty surrounding realization of such assets.

 

The federal and state tax returns beginning with the year ended December 31, 2019 are currently open for examination under the applicable federal and state income tax statutes of limitations.

 

The tax effects of the temporary differences and carry forwards that give rise to deferred tax assets consist of the following (in thousands):

 

    December 31,     December 31,  
    2022     2021  
Net operating loss carryforwards   $ 8,438     $ 7,229  
Equity based compensation     923       986  
Amortization     25       6  
Lease liability     409       -  
Capitalized research costs     707       -  
Accruals and other temporary differences     78       2  
Gross Deferred Tax Assets     10,580       8,223  
Depreciation     (46 )     (46 )
Right of use asset     (388 )     -  
Accruals and other temporary differences    
-
      
-
  
Less Valuation Allowance     (10,146 )     (8,177 )
Net Deferred Taxes   $
-
     $
-
  

 

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

 

    Year ended     Nine months
ended		  
    December 31,     December 31,  
    2022     2021  
Tax provision at statutory rate     21.0 %     21.0 %
State taxes, net of federal benefit     0.1 %     - %
Permanent items     (0.2 )%     0.6 %
Stock-based compensation     (4.0 )%     (6.3 )%
Change in fair value of warrant liability     1.5 %     - %
Deferred tax true-up / return to provision     (4.6 )%     8.7 %
Tax reform rate change     - %     (0.8 )%
Change in valuation allowance     (13.8 )%     (23.2 )%
Income taxes provision (benefit)    
-
 %    
-
 %

  

As of December 31, 2022 and 2021, the Company had no uncertain tax positions. The Company’s policy is to recognize interest and penalties that would be assessed in relation to the settlement value of unrecognized tax benefits as a component of income tax expense. The Company did not accrue either interest or penalties for the years ended December 31, 2022 and 2021.

 

The Company has not been under tax examination in any jurisdiction for the years ended December 31, 2022 and 2021.