Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

17. Income Taxes

As of December 31, 2023, the Company has a federal and state net operating loss carryover of approximately $201.2 million and $138.7 million, respectively, available to offset future income for income tax reporting purposes. The remaining federal net operating loss carryovers do not expire. Of our state net operating loss carryovers, $137.1 million would expire between the years 2027-2043

We periodically evaluate our net operating loss carryforwards and whether certain changes in ownership have occurred that would limit our ability to utilize a portion of our net operating loss carryforwards pursuant to Internal Revenue Code Section 382. An ownership change may occur, for example, as a result of trading in our stock by significant investors as well as issuance of new equity. As a result of ownership changes in prior years, a portion of our net operating losses have been limited.

The following table sets forth the tax effects of temporary differences that give rise to significant portions of the Company’s net deferred tax assets (in thousands):

	December 31,
	2023		2022
Deferred tax assets, net:
Net operating loss carryforwards	$	48,638	$	40,511
Operating lease assets		(405)		(371)
Operating lease liabilities		545		410
Depreciation		11,421		9,145
Stock compensation		2,530		2,027
Business interest expense		1,110		1,033
Capitalized research cost		7,332		3,334
Other temporary differences		820		691
Deferred tax assets		71,991		56,780
Valuation allowance		(71,991)		(56,780)
Net deferred tax assets	$	—	$	—

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development expenditures in the current year and requires taxpayers to amortize them over five years pursuant to Internal Revenue Code Section 174. The mandatory capitalization requirement increases the deferred tax asset for Capitalized Research Costs by $3.6 million for the year ended December 31, 2023.

ASC 740, Income Taxes, provides for the recognition of deferred tax assets if realization of such assets is more likely than not to occur. Based on management’s review of both the positive and negative evidence, which includes our historical operating performance, reported cumulative net losses since inception and difficulty in accurately forecasting results, we have concluded that it is not more likely than not that we will be able to realize all of our U.S. deferred tax assets. Therefore, we have provided a full valuation allowance against deferred tax assets at December 31, 2023 and 2022, respectively.

The following table sets forth reconciling items from income tax computed at the statutory federal rate:

	Year Ended December 31,
	2023		2022
Federal income tax at statutory rate	21.0	%	21.0	%
State income taxes, net of federal benefits	6.8	%	1.6	%
Officers compensation limit	(1.8)	%	(1.2)	%
Stock based compensation	(2.5)	%	—	%
Other permanent	(0.2)	%	(1.0)	%
Valuation allowance	(23.3)	%	(20.4)	%
Effective tax rate	—	%	—	%

Accounting literature regarding liabilities for unrecognized tax benefits provides guidance for the recognition and measurement in financial statements of uncertain tax positions taken or expected to be taken in a tax return. The Company’s evaluation was performed for the tax periods from inception to December 31, 2023. The Company is subject to examination by major tax jurisdictions for the years ended December 31, 2018 to 2022.

The Company recognizes uncertain tax positions net, against any operating losses or applicable research credits as they arise. Currently, there are no uncertain tax positions recognized at December 31, 2023 and 2022, respectively.